The IRS says that the cost of assets for tax purposes in situations like gifting are based on the cost of the property to you or the actual selling price received by the quali-fied organization. This cost may be the best indication of its FMV. The determination of FMV in these valu-ations is different from the determination of FMV for the purpose of a sale of a company as described. equipment being valued might be in non-operating condition and have little value be-yond the sale of parts. The analyst in this situation must then use factors such as comparables, liquida-tion value, etc., and the strength of the buyer market to originate conclusion of value. A Foundation In closing, a business valuation is a founda-tion to work upon in the consideration of the value of your business and/or assets. The FMV is the source of a private com-pany valuation. This value is based off of a fair price paid in an open market and not to a specific buyer. Determining the FMV of a business is cru-cial in many tax situations such as divorce and gifting to family members. As noted, a business valuation is used by the IRS to determine the fair market value of an asset for tax purposes and it is impera-tive that a certified valuation expert who No Fixed Formula The business valuation expert does not de-termine the FMV via a fixed formula. This is an important fact to note as this is the main reason that it is important to engage a certified business valuator as they have the knowledge base to apply the appropriate factors to derive the final valuation. For example, donated equipment should not be evaluated at a fixed rate of the cost of new replacement equipment since the knows the rules and laws for the tax impli-cations be engaged in order to obtain the value at which your taxes should most ac-curately be based upon. The more a company, individual or estate understands the basics of business valua-tions the more the entity can understand the value put forth by the expert. The basic valuation knowledge offered in this article provides the business owner with the power of knowing how to value their business and/or asset and, in turn, with this knowledge the reader is now in the power position of negotiations. CM Trisch Garthoeffner is the president of Anchor Business Valuations LLC. She has over 10 years of experience valuing privately held businesses ranging in sales size from $2 million to $50 million. Anchor values privately held businesses in a variety of sec-tors for a variety of reasons including divorce, sale or acquisition of a company, share valuation for employee incentive programs and financial report-ing. Trisch can be reached at (312) 632-9144. To learn more visit www.AnchorBVFS.com. FREE INFO: Reader Service 213 or CMMOnline.com/freeinfo www.cmmonline.com 37
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