Business valuation that holds up to scrutiny by the tax authorities
Business owners are interested in the highest possible business valuation result. This is certainly true when the company is offered for sale or an outside investment is sought. A shareholder buy-in is another situation that calls for the highest defensible business valuation.
Valuations for gift and estate taxes are quite different
Since the tax is levied on the current value of the business, business owners are interested in the lowest supportable valuation.
If your business valuation is too low, expect the tax authorities to be skeptical. Experienced tax agents are aware that business people want to reduce their taxes. Even if you retain skilled accountants and attorneys, a business valuation that is too low will likely draw the attention of the tax authorities.
If fact, the tax authorities may come up with their own valuation for your business. You will have to defend your appraisal if their number is considerably higher than yours.
J. Richard Claywell, CPA has valued over 1,000 businesses in Houston, TX and beyond, with the majority of them being for Estate and Gift Tax purposes.