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In valuing shares of S corporation stock, it is important to know that perhaps the most controversial unsettled issue in business valuation Tax Court litigation is whether earnings of an S corporation should be “tax affected,” i.e., increased or offset to account for S corporation status. Paul Hood provides a comprehensive, up-to-date discussion of this very important valuation issue.
Program Agenda
An introduction to the tax-affecting issue and why it matters;
A review of the significant Tax Court jurisprudence in this area, which began in earnest back in 1999 with the Gross v. Comr., TC Memo 1999-254, aff’d, 272 F. 3rd 333 (6th Cir. 2001), decision, and the subsequent Tax Court decisions, including the momentous 2019 decision in Jones Est. v. Comr., TC Memo 2019-101, in which the Tax Court permitted tax affecting for the first time; the Jackson Est. v. Comr., TC Memo 2021-48, involving the estate of iconic entertainer Michael Jackson, in which the Tax Court again rejected tax affecting; and the recent Tax Court decision in Cecil v. Comr., T.C. Memo. 2023-24 (Feb. 28, 2023), in which the Tax Court upheld tax affecting; A review of significant tax-affecting jurisprudence in federal and state courts other than the Tax Court;
Discussion of the 2014 IRS S Corporation Tax Affecting Job Aid;
The possible importance between a controlling interest valuation of S corporation stock versus valuation of a minority interest in S corporation stock;
Important economic studies of the tax consequences of the S election;
An introduction and comparison of several models of tax affecting S corporation earnings;
Ways around the tax-affecting problem;
Working with a business appraiser on a valuation of S corporation stock; and
Much more!
Learning Objectives
Participants will receive a comprehensive, objective tax and nontax discussion of the tax-affecting issue;
Registrants will learn why the Tax Court has been particularly troubled by the tax-affecting issue;
Attendees will gain an appreciation of the economic underpinnings of tax affecting; and
Participants will learn what lawyers will want them to address in any valuation of an entity that is taxed as an S corporation.
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