vrt board dlom 1 20-2012

Valuation Round Table January 20, 2011 ©

By Michael GregoryMichael Gregory Consulting LLC

[email protected]

mailto:[email protected]

2

Michael Gregory

• 28 years at IRS as engineer valuer, manager, operations team lead, controller, acting assistant director, territory manager

• Championed IRS DLOM Job Aide 2009, and Subchapter S Adjustments

• Opened Michael Gregory Consulting LLC September 2011

• [email protected] 651-633-5311• ASA, CVA, MBA, Qualified Neutral, PEJanuary 20, 2012 Michael Gregory Consulting LLC

www.mikegreg.com ©

mailto:[email protected]

http://www.mikegreg.com/

3Michael Gregory Consulting LLC www.mikegreg.com ©

Disclaimer

The opinions presented here are those of Michael Gregory. Michael Gregory does not represent the IRS. Any opinions presented in this seminar are those of the author and do not represent an official position of their current or previous employers. This material is offered for educational purposes only. The author and his employer expressly disclaim any liability, including incidental or consequential damages, arising from the use of this material or any errors or omissions that may be contained in it.

January 20, 2012


Introduction

• Discounts for Lack of Marketability• Subchapter S Adjustments• Observations Since Joining the Private Sector

January 20, 2012

Michael Gregory Consulting LLC www.mikegreg.com ©

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Discounts

January 20, 2012


Background and Today’s Presentation on DLOM’s

• IRS Job Aide on Discount for Lack of Marketability at irs.gov Originally Prepared 9/2009 for IRS Valuers

• August 2011 Developments• The Job Aide Public and Private• Comments on the Job Aide• Comments Since Entering Private Practice

Regarding DLOM’s

January 20, 2012


August 2011 Develops

• Retirement July 31, 2011• Call from Eva Lang and Jim Hitchner• Call from the IRS• Research• IRS Officially Publishes Job Aide August 22nd at

4:01 PM • Webinar August 23rd with John Hitchner and

Jim Alerding

January 20, 2012


Follow Up After Webinar

• Webinar Published• Other Follow Up Webinars– Lance Hall September 8, 2011 FMV Opinions

Rebuts Job Aide– Chris Mercer September 15, 2011 QMDM

• ASA BV Conference in Chicago October 10-12, 2011– DLOM Commentary – Espen Robak, John Finnerty, Ashok Abbott

January 20, 2012


Job Aide on DLOM at irs.gov

• Download It• Read It• Key Points– When– What – Why

• How It May Be Useful

January 20, 2012


IRS Job Aide Key Points

• Length 111 to 116 Pages Depending on Source• Prepared and Reviewed by 5 ASA’s, 8 AVA/CVA’s

and 3 CPA’s• IRS View on DLOM’s as of 2009• Identifies 33 Factors Deemed Important *• Includes 17 Initial IDR Items *• Includes How IRS Valuers Should Approach Issue As

a Reviewer* Suggest Include In Your Report

January 20, 2012


IRS Job Aide Key Points Continued

• Includes How IRS Valuers Should Approach Issue As a Valuer

• Provides Sample Report Language *• Detailed Strengths and Weaknesses of Most

Common Approaches *• Addresses Concerns with Fair Market Value

Opinions Statistical Analysis• Provides Detailed Commentary on Other Methods* Suggest Include In Your Report

January 20, 2012


Some Feedback From Three Webinars

• 900 Participants• Key Points From the Webinars– What Do You Rely Upon for DLOM?– How Long Do You Spend on DLOM?– How Useful and Will the Job Aide Change How You

Approach DLOM’s?– Will DLOM Change Approach and Will It Make You

Spend More Time DLOM’s in the Future?

January 20, 2012


Job Aide Comments

• Executive Summary– Background– Objective– Approach– Conclusion

• Introduction• Organization• Other Authors’ Observations

January 20, 2012


Subchapter S Adjustments

• Adjustment for a Subchapter S Corporation• Critique of Methods– Fannon– Grabowski– Mercer– Treharne– Van Vleet

• Reasonableness at IRS• Estate and Gift vs Valuer CommentaryJanuary 20, 2012


Life In New Venture

January 20, 2012


Observations Since Joining the Public Sector

• Sources: BV Wire, NACVA Ambassador Quick Read and Valuation Examiner, ASA BV Conference in Chicago, Networking with Valuers and Their Clients

• John Finnerty Asian Option Model Big 4• Pluris Espen Robak Secondary Markets• Valuation Advisors Largest Data Base and Int’l• Ashok Abbott Liquidity Analysis from Public

MarketsJanuary 20, 2012


Observations Since Joining the Public Sector Continued

• John Paglia Pepperdine Private Capital Markets– Revenue Successful Loans– $1 - $5 Mil 44%– $5 - $25 Mil 72%– >$25 Mil 90%

• Question – Where Does Your Client Obtain Funds and Where Is FMV Source for Funds?

January 20, 2012


Observations

• IRS Job Aide on DLOM’s Worth Reading• Look at Why It Was Written and Audience• Nothing Personal – Strictly Analytic• Multiple Approaches Recommended – Use

Judgment and Document Rationale• Courts More Analytically Oriented• See Pro’s and Con’s of Methods and Choose

Accordingly

January 20, 2012


Observations Continued

• Subchapter S Adjustments• Comments on Major Methods• Private Sector Commentary

January 20, 2012


Book Coming Out in May

• “How to Work with the IRS- Field Specialists and Revenue Agents”

• Note Business Valuers are within Field Specialists

• Analogy with International Examiners and Economists

January 20, 2012


Questions

January 20, 2012

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