For over 85 years, MPI has been providing rigorously prepared and thoroughly documented business appraisals and valuations for its clients. With our roots in estate and gift tax valuation services, MPI counts many of the country’s wealthiest families and largest privately owned businesses as clients. Our valuation and advisory work is regularly relied upon by these clients and their teams of expert advisors when the planning is complex and the stakes are at their highest.
Transferring assets, either as gifts or part of an estate, can be a complex process. Proper valuation helps business owners mitigate risks and provides objective, concise conclusions of value. For attorneys and CPAs working on behalf of business owners, it’s essential to offer strategic guidance and to help business owners navigate Internal Revenue Service (IRS) scrutiny. The benefit of working with MPI is that you can rely on our expertise to navigate the valuation process successfully.
Achieve Key Objectives
Working with a knowledgeable partner like MPI on your valuation project can help you achieve the following benefits:
- Compliance with IRS & US Treasury regulations
- Minimizing gift and estate taxes
- Identifying applicable and supportable valuation discounts
- Reducing the odds of an IRS audit
Our Comprehensive Valuation Services
Our team regularly handles business appraisals and valuations for estate and gift tax planning; operating businesses, investment holding companies, complex real estate organizations, preferred freeze partnerships, carried interest, private investment fund interests, professional sports franchises, restricted stock, notes, options, derivatives and royalties, among others. Our work is regularly used to support gift, charitable, and estate tax filings.
We tailor valuations to your particular circumstances and often work with complex assets and entities that are difficult to value, such as those that are illiquid or without market-based comparisons. We understand the need for tailored services for each valuation project and get to know your unique needs and use objective methods to arrive at a supportable valuation.
You can rely on our services for various valuation needs, including:
- Estate tax filings: At the passing of a privately-held business owner or shareholder, the fair market value of the business interest must be determined for estate tax.
- Gift tax filings: When transferring closely-held interests, these transfers may be considered gifts and subject to federal gift tax. We help establish the fair market value to comply with gift tax regulations.
- Succession planning: Facilitate a smooth transition for a business using valuation to determine fair purchase price, establish buy-sell agreement terms, and inform financing decisions.
- Charitable donations: We’re qualified to determine the fair market value of donated closely-held interests for charitable income tax deductions. We closely follow IRS requirements to help substantiate the deduction and avoid potential challenges from tax authorities.
Reach out for a Confidential Consultation
We’re here to provide exceptional client service and defendable results. Contact us to discuss your specific valuation needs.
Why Trust MPI With Your Valuation Needs?
At Management Planning, Inc., we have over 85 years of experience in business valuation. We focus on rigorously prepared and thoroughly documented estate and gift tax appraisals. A partner oversees each valuation, and we conduct it as if it will be subject to the highest level of scrutiny. Throughout the process, we rely on best practices, deep thinking, and proprietary research, such as our Restricted Stock Study, to complete comprehensive valuation reports.
Our team has extensive expertise in this area, including:
- Decades of successful experience in handling IRS audits
- Specialized knowledge of valuing closely held businesses for gift and estate tax compliance
- Writing and national lecturing on estate planning and gift tax valuation topics
- Managing thousands of thorough valuation assignments for various estate, gift, and charitable tax purposes
Want to Know More About Our Process & Working with Our Team?
At MPI we are driven by providing exceptional client service, being easy to work with and delivering defendable results. Each engagement is managed and overseen by a Partner and is conducted as if it will face the highest level of scrutiny.
Pre-Engagement Due Diligence
Senior MPI personnel work directly with the client and/or their team of advisors to gather basic facts regarding the subject interest/entity and to understand the purpose of the proposed valuation project. During this period, MPI will take the client through a scoping process and may review certain financial and organizational documents so that MPI can appropriately evaluate the complexity of the project and determine an estimate of fees. Following our pre-engagement due diligence, MPI then submits a proposal for the valuation work which will include a background of the proposed project, an information request and a project fee (expressed as a fixed fee, narrow fee range or hourly fee with a retainer). A thorough pre-engagement diligence period is critical, especially on larger or more complex projects, to align expectations and ensure a seamless engagement from start to finish.
Engagement Team
Once MPI is engaged to determine the value of your business and following receipt of all initial information requests, MPI puts together an engagement team. Projects are typically staffed with a partner, project relationship manager, senior analyst and an associate. With a deep bench of experienced analysts, we always maintain the flexibility to bring in additional senior analyst level support as needed.
Engagement Process
With the team in place and initial information in-hand, MPI begins the engagement by reviewing all financial and corporate documents. From there, initial financial modeling and industry research commences. If the subject entity is an operating company, MPI will schedule a site visit at the main operating facility to conduct a due diligence interview with the management of the business. The on-site visit and interviews with management are a critical part of the process. During this time the appraiser must learn as much about the business as possible and be able to document that it has a thorough understanding of the company and the industry in which it operates.
Following due diligence with the client, MPI next considers the appropriate approach to determine the value of the subject interest/entity. There are three fundamental approaches to valuing any asset; namely, the income, asset, and market approaches.
- The income approach involves projecting the future benefits of owning an asset (usually some measure of economic income such as cash flow, earnings or dividends) and translating those future benefits into value based upon the time value of money and the investment risks associated with ownership.
- The asset approach involves the determination of the total asset value of a corporation or business and reducing that value by the number of its outstanding liabilities. The starting point in using the asset approach is an entity’s NAV (net asset value). The NAV business valuation method within the asset approach is often the appropriate method to use to evaluate an investment holding company formed for the purpose of owning and managing securities of other companies, real estate or natural resources.
- The essence of the market approach is to use companies in the same general industry as the subject business to provide valuation guidelines. Valuation indicators for such companies or transactions can be determined and analyzed. As appraisers, we would then make a judgment as to whether investors would find the subject business more or less attractive than such guideline companies.
MPI will determine if one or more of the aforementioned valuation approaches is appropriate for the subject interest/entity.
Preliminary Valuation Conclusions
With due-diligence, financial model review, industry research and internal quality control all complete, MPI delivers its initial conclusions in draft form to the client and/or its advisors. This first delivery milestone is critical as we will then look for feedback from the client to address any issues that may have been overlooked during due diligence that merit further discussion. MPI prepares all valuation work as though it could be evidence in litigation, and the MPI Partners responsible for signing each report are always willing and able to testify to the value that is ultimately concluded.
The Documented Report
Once the valuation conclusion has been finalized, MPI begins work on the written report. The report typically consists of text and supporting charts, tables, and exhibits. It will be prepared in conformity with the Uniform Standards of Professional Appraisal Practice as promulgated by The Appraisal Foundation and the Business Valuation Standards, Principals of Appraisal Practice and Code of Ethics of the American Society of Appraisers. The report will be fully suited for use in discussions with Internal Revenue Service representatives or in court, if necessary.
The timing from start to finish depends on the complexity of the assignment. MPI keeps the client updated throughout the entire process, and is always aware of any upcoming filing deadlines to ensure that the client and/or its advisors have sufficient time to review in advance.
Post-Issuance of Valuation Report
MPI’s trust and estate valuation experts are willing to stand by their valuation opinions should the IRS audit the transaction or the subject estate. MPI has eight decades of experience presenting and defending our work product to IRS agents and engineers at the initial audit and appellate levels. MPI’s valuation experts will work with the IRS to help explain its valuation, understand the report, and answer any questions that the IRS may have to help resolve an audit. If the client and the IRS cannot agree to a resolution, our senior professionals have the ability and credentials to appear as an expert witness in depositions or in U.S. Tax Court.
Frequently Asked Questions for Estate & Gift Tax Business Valuations
How does a business valuation affect gift and estate tax planning?
A business valuation can be an important component of gift and estate tax planning because it establishes the fair market value of a business interest being transferred. The valuation may affect the value reported for a taxable gift, an estate-tax filing, a charitable contribution, or a succession-planning transaction. It can also help identify valuation considerations relevant to closely held business interests.
Tax consequences depend on each client’s circumstances and should be evaluated with qualified tax and legal advisors.
What should a business valuation include for an IRS audit or tax filing?
For a gift or estate tax matter, a business valuation should provide a clear, supportable analysis of the ownership interest and its fair market value as of the relevant date. The report should document the information reviewed, key assumptions, valuation approaches, market evidence, and the reasoning behind the conclusion.
Thorough documentation can help business owners, attorneys, and CPAs support the reported value if it receives IRS scrutiny.
Why is a business valuation important when gifting a business interest?
When a business owner transfers an ownership interest as a gift, the transfer may be subject to federal gift tax. A business valuation helps establish the fair market value of the gifted interest for reporting and planning purposes. A supportable valuation can also help address issues related to valuation discounts, gift tax exclusions, and future IRS review.
Can a business valuation support charitable donations of business interests?
A business valuation can help determine the fair market value of a donated business interest for charitable income-tax deduction purposes. Because charitable gifts of closely held business interests can involve specific IRS requirements, a thorough valuation report can help substantiate the reported deduction and support the documentation needed for the contribution.
Testimonial
“My family and I are so grateful for all your work on this audit and over the years for the family at large. Having now been through this estate tax audit with you, it just proves why hiring MPI was so important at the outset.”
-MPI Client
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