1031 Exchanges

1031 Exhanges are still one of the best kept secrets of the IRS. To defer taxes, assets require a legitimate valuation for a like-kind exchange to pass IRS scrutiny.

Business Valuations

Book value is not accurate and usually different from Fair Market Value. If the machinery/equipment is not valued properly, the entire business valuation is skewed. Lots of liability!

Buy/Sell Agreement

When assets from a business are sold, fixed and tangible assets often must be valued separately from the business' intangible assets.

Converting from C Corp to S Corp

The Federal Tax Code requires an appraisal of the assets in order to convert from C Corporation to an S Corporation.

Cost Segregation

Cost segregation is a process to identify personal property assets that often get buried or lumped together within real property asset. To maximize depreciation deduction, each of the personal property assets would have to be valued separately with a certified report to substantiate the taxable value.

Dissolution

As with divorces, when partners dissolve their relationship, there may be a need to value the tangible assets that were held during the relationship.

Divorce

Divorce is sticky particularly when a business is owned by one or both partners. Upon commencement of proceedings, the courts will seek to divide the value of the business between the parties. Hence, a complete business valuation will be ordered and, as stated with Buy/Sell agreement above, the tangible and intangible assets likely may be required to be valued separately.

Employee Stock Ownership Plans (ESOPs)

If your business is considering or already has an employee stock ownership plans (ESOP), know that initial asset values contributed must start out with accurate appraisals of tangible assets such as machinery/equipment. Book value is not accurate and will not hold up in a dispute.

Estate Plannings

To ensure that after your death your property passes exactly to those whom you trust and love, legal trusts and wills must contain accurate values for all items.

Financing/SBA Loans

Businesses often use their tangible assets as collateral to support loans. Often, the loan amount is derived from 40 to 60% of the value of the pledged assets. To obtain the maximum loan amount, a business owner would need to provide a certified appraisal report.

Gifting

The IRS requires an appraisal for each item becoming a gift.

Insurable Value

It is undoubtedy necessary for a business to purchase liability insurance in the case of an event such as a fire or a theft. However, in most cases of an event, the business has to rely upon the value given by the insurance company, because the business owner did not obtain certified values the business assets. In many cases, the insurance company will write a check for far less than the true replacement cost simply because the business owner could not provide an independent and substantiated value(s) to the contrary. Further, if the assets were used as collateral, then the tangible assets would need to be appraised properly to cover the their value in the case of loss.

Litigation

Being dragged into court is nothing anyone wants to think about. But in our litigious age, it is a reality that must be prepared for whether the suit is filed or could be due to the nature of a particular business or the nature of people.

Liquidations

When it is time to cash out on your business, you must have accurate books regarding asset values to transition smoothly from business ownership to liquid cash for your next adventure.

Partnership

If you are joining a partnership or adding a new partner to an existing legal relationship, all tangible assets introduced as capital contribution must be valued.

Property Taxes

Personal property taxes are assessed based on market value; however, there maybe a conflict between what a local municipality derived as market value versus what the business owner may derive. A certified machinery and equipment appraisal would be necessary to contest the assessed value.

Retirement Planning

Retirement planning must be performed carefully in order to know the true value of assets that might be systematically liquidated, or in order to sell the business at the highest, indisputable value in exchange for the life and freedom that a client worked hard for so many years.

Sarbanes-Oxley

Since government created Public Company Accounting Reform and Investor Protection Act of 2002 (also known as Sarbanes-Oxley) in response to Enron and like accounting scandals, business owners must be careful to comply and not be caught in the undertow. All tangible assets must be valued and substantiated.

Tax Purposes

No one wants to receive an objection from the IRS. Sleep better feeling the IRS has less reason to challenge to art of accounting. And if they do, you'll be ready with beans in an indisputable row.

Trust Agreements

Trust agreements, by their very name, rely on the trust of the obligated parties. Trust should be based on as solid of figures as possible for the confidence of all involved.

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