Valuation for Tax and Succession Planning
Is the founder of the business looking to retire? Prudent transition planning may involve transferring/selling the shares of the business to the next generation in the family. Often, the fair market value of the company shares is required either by tax laws or by a bank or insurance company if a loan is required to finance the purchase the shares from the founding shareholder.
Navigating the nuanced realm of estate and gift tax valuations requires a deft understanding of the distinct objectives involved. Unlike scenarios such as company sales or external investment pursuits where a higher business valuation is desirable, estate and gift tax situations call for a meticulous and supportable lower valuation to mitigate tax implications.
It’s imperative for business owners to exercise due diligence in selecting a competent valuation firm to provide a fair and supportable valuation for estate and gift tax purposes. An unsupportable low valuation, while beneficial for the taxpayer, may spark skepticism and potentially trigger a re-evaluation by tax authorities.
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