Page 22 - Business Valuation for Estates & Gift Taxes

e. The appraisal procedures that were followed, and the reasoning that supports the anal-
yses, opinions, and conclusions.

f. The valuation method utilized, the rationale for the valuation method, and the procedure
used in determining the fair market value of the asset transferred.

g. The specific basis for the valuation (such as specific comparable sales or transactions),
sales of similar interests, asset-based approaches, merger-acquisition transactions, and so
on.

These requirements should be considered baseline criteria because the IRS may require additional in-
formation. This would be decided on a case-by-case basis.

Technical Advice Memorandum (TAM) 9436005

This memorandum addresses the premium that may be assigned to swing vote positions. In the TAM,
the IRS emphasized that if minority interest holders could band together to gain control of a company, a
swing vote premium would be appropriate for those interests.

Conclusion

Statutes and IRS rulings related to fair market value play an integral part of any valuation engagement,
especially when dealing with estate and gift tax issues. It is important for valuation analysts to know
what statutes and IRS decisions are relevant for any given engagement. Furthermore, it is also extremely
important for valuation analysts to be cognizant of the scope and limitations a particular statute, ruling,
or authoritative publication of any kind has when referencing any of these within a valuation report.

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