February 14th, 2006
Issue #  41-1

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The BV E-Update is your complimentary source for the latest valuation court cases, plus timeless tips, information, and definitions.

February 23, 2006 Telephone Conference

Fair Value in Financial Reporting
Date/Time: February 23, 2006 at: 10:00am-11:40am PST/11:00-12:40MT/12:00-1:40CST/1:00-2:40EST
Moderator: Jay Fishman, FASA, CBA
Speakers: Anthony Aaron, CFA, ASA – Stephen Jones, ASA – James Wilson, ASA

With FASB’s imminent release of a new accounting standard on Fair Value Measurement, this important issue is getting a great deal of attention. BVR’s teleconference is a must for any business valuation professional concerned about the upcoming changes.

The session will explore in detail FASB’s framework designed to clarify measurement of Fair Value in a manner that analysts can consistently apply to all assets and liabilities. The expert panel will address applying the Fair Value standard to asset impairment tests, distinguishing between Fair Value and Fair Market Value, auditing Fair Value measurements and much more. They will provide an in-depth analysis on how Fair Value should be defined in light of FASB’s changes.

You will not want to miss this important session!

More information on current and future telephone conferences is available at www.BVResources.com /Conferences


New Court Cases

    • Estate of Bongard v. Comm’r, 124 T.C. 95, 2005 U.S. Tax Ct. LEXIS 8 (March 15, 2005).Judge Goeke.
    • In re Acterna Corp. Securities Litigation, 2005 U.S. Dist. LEXIS 14899 (D. Md. July 26, 2005).Judge Chasanow.
    • Keller v. United States, 2005 U.S. Dist. LEXIS 25682 (S.D. Tex., October 3, 2005).Judge Rainey.

NEW! Click here for your complimentary case abstract of the Estate of Bongard v. Comm’r

These cases and more are available to subscribers to the BVLaw database at BVLibrary.com . Abstracts will be available in an upcoming issue of Business Valuation Update® at BVLibrary.com

BVMarketdata Update

New updates to the Pratt’s Stats™ database have been posted online. 146 new transactions of privately-held businesses have been added to the Pratt’s Stats™ database, which now contains 8,136 transactions. The transactions in Pratt’s Stats™ have a median revenue of $1.6 million and a $1.5 million median selling price.

In addition to the Pratt’s Stats™ update, we have also added new transactions to the following database since the last E-Update:

  • Public Stats™ (now has 1,934 count)

These databases and more are available at BVMarketdata.com


What partnership owners should avoid to minimize the risk of IRS attack


What should partnership owners avoid in operating the partnership to minimize the risk of IRS attack?

One of the first things that we like to see is that on forming the partnership, the partners have discussed the partnership terms. They need to take a look at the management structure and figure out who’s going to be in charge and how they’re going to handle things. They especially need to consider whether to change the investment policy from the policy that the major contributing partner held prior to formation and also afterwards, so that we can at least have an argument to avoid the circuitous recycling of the value classification that’s used by the Tax Court in Harper and others.

To the extent possible, or to the extent they haven’t already provided for in the partnership agreement, the partners need to document those discussions and decisions related to: (1) the management structure; (2) managemet compensation; (3) the firm’s investment policy; (4) the expected distributions; (5) the transfer restrictions on partnership interests; and (6) the terms of the partnership. In other words, partners need to give us as much meat as possible to work with, to argue that this is a bona fide sale for full and adequate consideration.This gets us out of the 2036 purview, because it’s a congressionally written exception that having that negotiation--that back and forth negotiation and documentation-- helps prove to the IRS that the partnership is, in fact, an arm’s length transaction.

Stephanie Loomis-Price, JD, Baker Botts, LLP

This Q&A was taken from the June 2005 teleconference titled: Shielding Your FLPs and FLLCs Against IRS Attack

BV Definition of the Week

Capital Structure

“The composition of the invested capital of a business enterprise, the mix of debt and equity financing.”

Business Valuation Resources, LLC

The American Institute of Certified Public Accountants (AICPA)


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