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Court ruling: Accounting for embedded taxes


SKU: ADVja091. Category: .


Abstract: A hotly disputed business valuation issue recently was addressed in a seven-years-plus divorce case, one of first impression in New York. The appellate level court considered the extent to which the value of a holding company owned by the husband should be reduced to reflect the federal and state taxes embedded in the securities owned by the company due to unrealized appreciation. The case involved choosing between an “historical tax rate” approach to valuation vs. one in which an actual sale of the company’s assets is assumed to occur on the valuation date. A sidebar addresses the argument of the husband’s expert that the company’s value should be reduced by the nontax costs of liquidation.

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