1. Capital Advisors, Inc. utilizes full-time business appraisers that are accredited by the American Society of Appraisers. Why is this important?
2. Your fees are higher than some of the other firms that have bid on our valuation engagement. Why is this?
3. What has been your success in defending your reports before the IRS and other third parties?
4. My accountant said that he can prepare a business valuation for me. Why shouldn't I use him?
5. Why can't I just estimate the value of my company's stock and then hire you if my gift tax return gets audited?
6. I have heard a lot about family limited partnerships that hold real estate, publicly-traded securities or other assets. Have you appraised these types of partnerships?
7. I noticed on your Curriculum Vitaes that Bryan Goetz is an attorney. Does this help him as a business appraiser?
Answer: Business appraisals are used for a variety of purposes, but each purpose requires that the appraisal withstand scrutiny by a third party. This scrutiny can be by the IRS, the U.S. Tax (or other) Court, a buyer or seller, a lender, or other party. Only a full-time business appraiser has the time and incentive to keep up with the constantly changing techniques and legal environment of business valuation. Likewise, accreditation is highly desirable due to the unfortunate fact that business appraisers are not required to be licensed. Anyone can call themselves a business appraiser, and many do.
Accreditation by the American Society of Appraisers (ASA) ensures the client that the appraiser has passed intensive written exams, has at least two years of full-time experience (five years for senior members) and continues to educate himself through approved seminars and courses. Other so called accrediting societies do not require full-time business appraisal experience, and no other society requires the full package of experience, education, ethics, and examination that ASA does.
The importance of using a qualified expert is demonstrated in the case of The Estate of Ford (66 TCM 1507, 1993) where the U.S. Tax Court rejected an "expert's" report. The Court noted that the professor of finance was not a member of any appraisal society or association, nor a full-time business appraiser.
In the Estate of Edgar A. Berg (61 TCM 2949, 1991), where the "experts" were experienced CPAs, the Court said "the expert reports submitted by the petitioner were lacking substance and analysis. The authors of the reports were not professional appraisers, had no formal education in the valuation of business enterprises, and were not members of any professional associations involved in the education and certification of appraisers".
Answer: Our fees are actually at the low end of the business appraisers that we feel are comparable with respect to accreditation, experience and quality. The lower bids most likely are coming from firms that do not utilize full-time business appraisers and/or have inferior qualifications. We strive to make our valuations a high quality product at an affordable price. You could get comparable quality and pay much more, or you could pay much less and get much less.
Answer: Our success to date has been excellent. Although compromising with the IRS and other parties is a fact of life, we have never had an appraisal that was rejected by the IRS, the U.S. Tax Court or any other entity. In other words, our clients have been very satisfied with our reports and our ability to defend them when the need arose.
Answer: Aside from the earlier mentioned cases, your accountant could easily be seen as a biased party. Whether or not he actually is, a third party would question the independence of his appraisal. It is very important to third parties that a valuation be done fairly and independently.
Answer: There are substantial over and under valuation penalties in the Tax Code when there is no reasonable basis for the valuation claimed on the return. An estimate by the owner would not be a reasonable basis. However, an appraisal by our firm would undoubtedly be a reasonable basis for valuation.
Answer: We have appraised numerous "family limited partnerships" and the relatively few that have been audited by the IRS had favorable results. We provide comprehensive valuations of these entities as opposed to unsubstantiated discount letters provided by some of our competitors.
Answer: Although not mandatory, the fact that Bryan Goetz is an attorney enhances the quality of our appraisals. Most of the time, the effect of legal documents on the rights of a shareholder or partner can be substantial. For example, the limited partners' rights under a family limited partnership agreement has as much a bearing on the value as the underlying assets. Mr. Goetz's legal background enables him to assess the effect of these types of agreements and documents on value, and also enables him to structure valuation methodologies in accordance with current case law.
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