Goodwill is defined as the intangible asset arising as a result of name, reputation, customer loyalty, location, products, and similar factors not separately identified. The notion of goodwill has existed since mankind first entered into commercial activity. In ancient Egyptian bazaars, merchants knew the location closest to the city gates would provide the best opportunity … Continue reading Top 10 Questions of Value: 4. What Is Goodwill?

Yes! Business valuations are a must for estate and gift tax purposes. Estate valuation principles relating to business interests are in Regs. 20-2031-2 (f) and 20-2031-3. Gift tax valuation principles relating to gifts and bargain sales of a business interest are in Reg. 25.2512.3. Valuations for estate tax purposes are critical because the valuation determines … Continue reading Top 10 Questions of Value: 3. Are Business Valuations Needed for Gift and Estate Tax Purposes?

Generally there are two discounts considered in the valuation of a closely held business: 1) Lack of Marketability (Liquidity) and 2) Minority Interest (Lack of Control). The marketability (or liquidity) discount will apply in most valuation situations of privately-held companies. The data used in developing the appropriate discount or capitalization rate applicable to the subject … Continue reading Top 10 Questions of Value: 2. What “Discounts” Are Applicable When Gifting a Business Interest?

In its simplest form, the Capitalization of Earnings Method provides an estimate of value of a company by converting the future income stream into value by dividing by a capitalization rate that incorporates a required rate of return for risk assumed by an investor along with a factor for future growth in the earnings stream being … Continue reading Top 10 Questions of Value: 1.What Is the Capitalization of Earnings Method?