Business Valuation and Taxes Procedure Law and Perspective phần 2 pot

2. Value as an assemblage of assets. Value in place, as part of a mass assemblage of assets, but not in current use in the production of income, and not as a going-concern business enterprise. 3. Value as an orderly disposition. Value in exchange, on a piecemeal basis (not part of a mass assemblage of assets), as part of an orderly disposition. This premise contemplates that all the assets of the business enterprise will be sold individually, and that they will en- joy normal exposure to their appropriate secondary market. 4. Value as a forced liquidation. Value in exchange, on a piecemeal basis (not part of a mass assemblage of assets), as part of a forced liquidation. This premise contemplates that the assets of the business enterprise will be sold individually and that they will experience less-than-normal exposure to their appropriate secondary market. 26 CONCLUSION The correct standard of valuation for federal tax purposes is fair market value. The definition of fair market value is found in Treasury materials and has been refined over the years by the many courts that have dealt with the issue (see Chapter 22). Proper valuation for federal tax purposes requires an intricate knowledge of this complex concept. 16 STANDARDS OF BUSINESS VALUATION 26 Shannon P. Pratt, et al., Valuing a Business, 4th ed. (New York: McGraw-Hill, 2000): 33. Chapter 2 Subsequent Events Summary Key Question Valuation Date Subsequent Events—Exceptions Reasonable Foreseeable Events Estate Claims Adjustments Subsequent Sales Conclusion SUMMARY Generally, since valuation is determined as of a specific date, events subsequent to the valua- tion date should not affect the value of property as of the valuation date. This rule is subject to some notable exceptions. Subsequent events may be relevant to show what knowledge the hypothetical buyer and seller could reasonably be expected to have at the valuation date. Some authorities hold that subsequent events evidence need only meet the standard test of relevancy. Courts may admit such evidence if probative of value. Some courts use a subsequent sale of the property to establish its presumed fair market value, adjusting that number for intervening events between the date of valuation and the date of sale. Some authorities use subsequent sales as evidence of value rather than as something that affects value. KEY QUESTION Should events occurring subsequent to the valuation date affect the value of the property as of the valuation date? This question, while seemingly capable of a simple answer, has produced a disconcerting array of responses in the many courts that have addressed the issue. VALUATION DATE We start with the obvious. To value a business interest, we must pick a point in time in which the valuation is to be performed. Sometimes, this date is simply the client’s fiscal year-end or is established by mutual agreement. In an employee stock ownership plan, the valuation date 17 is set forth in the plan and is usually the last day of that plan’s fiscal year. In a merger, the valu- ation date is the date of such merger. In the case of federal estate and gift taxes, the valuation date is set by Regulations. For ex- ample, in gift tax matters the gift is valued as of the date the gift is transferred. 1 With respect to income taxes and charitable contributions of property, the valuation date is the date when the gift is effectively and legally transferred. 2 For estate tax matters, the valuation date is the date of death or, alternatively, six months after death. 3 The valuation date is important for determining fair market value. Fair market value re- quires that we value property at the price at which it would change hands between a willing buyer and seller, both having reasonable knowledge of relevant facts. To ascertain what facts the willing buyer/seller would know, we need to establish the valuation date as the focal point for determining the knowledge relevant to our valuation. Events subsequent to the valuation date, in most cases, are not known by the hypothetical buyer/seller and therefore are not rele- vant to the valuation. The Court of Federal Claims stated the rule this way: [T]he valuation for income tax purposes must be made as of the relevant date without regard to events oc- curring subsequently. 4 In some instances, a day, perhaps even an hour can make a difference in valuations. Stock markets can change value rapidly. Even real estate is subject to quick fluctuations depending on economic and political situations. Consider the value of the World Trade Center on Sep- tember 10, 2001, compared to September 11, 2001, or consider the value of real property in downtown Baghdad a week before the Coalition invasion and again one day after the bomb- ing began. Likewise, consider the value of a home overlooking a scenic river, compared to the same home after a 100-year flood wipes out everything around it and fills the basement with sludge. Finally, consider the value of a lottery ticket on the day of purchase, and then a week later when it is the winning ticket. To state the obvious, value is highly dependent on reasonable knowledge of relevant facts. The valuation date fixes the time of the valuation and limits the universe of knowledge that can be used to determine value. The Supreme Court stated this rule for subsequent events in Ithaca Trust Co. v. United States, 5 where Justice Holmes considered the value of a charitable remainder subject to a life estate. The question before the court was whether the charitable remainder became more valuable (as a deduction from the gross estate) because the life tenant, who survived the testator, died before reaching her actuarial life expectancy. The court held that the 18 SUBSEQUENT EVENTS 1 Reg. § 25.2512-1. 2 Reg. § 1.170A-1(b). 3 Reg. § 20.2031-1(b); Code §§ 2031(a), 2032(a). 4 Grill v. United States, 303 F.3d 922 (Ct. Cl. 1962). 5 279 U.S. 151 (1929). See also First National Bank v. United States, 763 F.2d 891 (7th Cir. 1985); Estate of Smith v. Comm’r, 198 F.3d 515 (5th Cir. 1999) rev’g. 108 T.C. 412 (1997); Estate of McMorris v. Comm’r, 243 F.3d 1254 (10th Cir. 2001), rev’g. 77 T.C.M. (CCH) 1552 (1999); Propstra v. United States, 680 F.2d 1248 (9th Cir. 1982); Estate of McCord v. Comm’r, 120 T.C.M. (CCH) 13 (2003) (Judge Foley dissenting). value of the thing to be taxed must be valued as of the time when the act is done. The court stated: The estate so far as may be is settled as of the date of the testator’s death. The tax is on the act of the testa- tor not on the receipt of property by the legatees. . .[T]he value of the thing to be taxed must be estimated as of the time when the act is done. . .[I]t depends largely on more or less certain prophecies of the future; and the value is no less real at that time if later the prophecy turns out false than when it becomes true. Tempting as it is to correct uncertain probabilities by the now certain fact, we are of [the] opinion that it cannot be done, but that the value of the wife’s life interest must be estimated by the mortality tables. 6 SUBSEQUENT EVENTS—EXCEPTIONS This seemingly neat conclusion is undone by the word relevant. Recall that fair market value assumes that the willing seller and buyer have reasonable knowledge of relevant facts on the valuation date. In deciding what is relevant, some courts have enlarged the focal point of the valuation date by deeming subsequent events “relevant” to taxpayers’ perceptions at that time. Reasonable Foreseeable Events Some courts find certain events, transactions, and circumstances that happen after the valuation date to be relevant to the valuation if they are reasonably foreseeable as of the valuation date. 7 It is natural to think that the willing hypothetical buyer will consider the future when de- ciding whether to buy. To the extent that such willing buyer is reasonably able to project into the future, it would seem that one may consider subsequent events that are foreseeable when performing a valuation. An old but still viable tax case states: Serious objection was urged by [the government] to the admission in evidence of data as to events which oc- curred after [the valuation period]. It was urged that such facts were necessarily unknown on that date and hence could not be considered It is true that value . . . is not to be judged by subsequent events. There is, however, substantial importance of the reasonable expectations entertained on that date. Subsequent events may serve to establish that the expectations were entertained and also that such expectations were reasonable and intelligent. Our consideration of them has been confined to this purpose. 8 Thus, the logic of permitting subsequent events to affect valuation is that they may be helpful and therefore relevant in proving that the hypothetical buyer/seller did reasonably foresee such events. In this manner, the later-occurring events are to be given consideration in the valuation. The weight to be given such evidence may, however, be negligible. 9 Subsequent Events—Exceptions 19 6 Ithaca Trust Co. v. United States, supra note 5, 279 U.S. 15 (1929). 7 Estate of Sprull v. Comm’r, 88 T.C.M. (CCH) 1197 (1987 (subsequent events “could not have been reasonably foreseen at the time of the decedent’s death”). 8 Couzens v. Comm’r, 11 B.T.A. 1040 (1928). 9 Campbell v. United States, 661 F.2d 209 (Ct. Cl. 1981). Estate Claims A tax is imposed on the transfer of a taxable estate of every decedent who is a citizen or resi- dent of the United States. The taxable estate is the gross estate less those deductions allowable under Code sections 2051 through 2056. Accordingly, the issue arises as to whether post- death facts can be considered in valuing claims against the estate that are allowable in the ju- risdiction where the estate is being administered. On this issue, there is a split of authority in the Circuit Courts of Appeal. The Ninth Circuit, in Propstra v. United States, 680 F.2d 1248 (9th Cir. 1982), held that the Ithaca Trust date-of-death valuation principle requires that at the instant of death, the net value of property should, as nearly as possible, be ascertained. In contrast to Propstra, the Eighth Circuit in Estate of Sachs v. Commissioner 10 held that the date-of-death principle of valuation does not apply to claims against the estate deducted under section 2053(a)(3). In this case, the trial court held that the estate was permitted to deduct the subsequently refunded tax liability because it existed at the decedent’s death. The appellate court then stated: We hold that where, prior to the date on which the estate tax return is filed, the total amount of a claim against the estate is clearly established under state law, the estate may obtain under [predecessor to section 2053(a)(3)] no greater deduction than the established sum, irrespective of whether this amount is estab- lished through events occurring before or after the decedent’s death. In essence, the court held that an estate loses its section 2053(a)(3) deduction for any claim against the estate that ceases to exist legally. In a recent case, the Fifth Circuit was persuaded that the Ninth Circuit decision in Prop- stra correctly applied the Ithaca Trust date-of-death valuation principle to enforceable claims against the estate. In Estate of Smith v. Commissioner 11 the Court stated: As we interpret Ithaca Trust, when the Supreme Court announced the date-of-death valuation principle, it was making a judgment about the nature of the federal estate tax specifically, that it is a tax imposed on the act of transferring property by will or intestacy and, because the act on which the tax is levied occurs at a discrete time, i.e., the instant of death, the net value of the property transferred should be ascertained as nearly as possible as of that time. This analysis supports broad application of the date-of-death valuation rule. We think that the Eighth Circuit’s narrow reading of Ithaca Trust, a reading that limits its application to charitable bequests, is unwarranted. . . . [W]hen Congress wants to derogate from the date-of-death valuation principle it knows how to do so. We note in passing that since Ithaca Trust, Congress has made countless other modifications to the statute, but has never seen fit to overrule Ithaca Trust legislatively. Adjustments Courts sometimes make adjustments to the valuation for events subsequent to the date of valuation. 20 SUBSEQUENT EVENTS 10 856 F.2d 1158, 1160 (8th Cir. 1988), rev’g. 88 T.C. 769 (1987). 11 198 F.3d 515 (5th Cir. 1999). In Estate of Scanlan v. Commissioner 12 the court used a stock redemption value more than 2 years from the valuation date as a starting point in determining fair market value. In this re- gard the court stated: We start with the redemption price . . . because we believe that it represents the arm’s length value for all . . . stock in August 1993. We adjust this price to account for the passage of time, as well as the change in the setting from the date of Decedent’s death to the date of the redemption agreement. The court went on to say: Federal law favors the admission of evidence, and the test of relevancy under federal law is designed to reach that end Tax Court Rules of Practice and Procedure provides broadly that evidence is “relevant: if it has ‘any tendency’ to make the existence of any fact that is of consequence to the determination of the action more probable or less probable than it would be without the evidence.” Rule 401 of the Federal Rules of Evidence favors a finding of relevance, and only minimal logical relevancy is necessary if the disputed act’s existence is of consequence to the determination of the action In fact, the Federal Rules and prac- tice favor admission of evidence rather than exclusion if the proffered evidence has any probative value at all. Doubts must be resolved in favor of admissibility. The court then described how it considers post-death factors by stating: This passage of time, as well as the financial data referenced by petitioner and the fact that the offer was for all of [the company’s] stock, are facts that we must consider in harmonizing the offering and redemp- tion prices with the value of the subject shares on the Valuation Dates Of course, appropriate adjust- ments must be made to take account of differences between the valuation date and the dates of later-occurring events. For example, there may have been changes in general inflation, people’s expecta- tions with respect to the industry, performances of the various components of the business, technology, and the provisions of the tax law that might affect fair market values between the valuation date and the subse- quent date of sale. “Although any such changes must be accounted for in determining the evidentiary weight to be given to the later-occurring events, those changes ordinarily are not justification for ignoring the later-occurring events (unless other comparable offer significantly better matches to the property being valued)” [citations omitted]. In Estate of Jung v. Commissioner, 13 the court took into consideration whether the events were foreseeable as of the valuation date. It then proceeded to examine sales of assets more than two years after decedent’s death and stated the following: Of course, appropriate adjustments must be made to take account of differences between the valuation date and the dates of later-occurring events. For example, there may have been changes in general inflation, peo- ple’s expectations with respect to that industry, performances of the various components of the business, technology, and the provisions of tax law that might affect fair market value. The court in Jung then drew a line between two categories of later-occurring events, dis- tinguishing between later-occurring events that affect fair market value as of the valuation date, and later-occurring events that may be used as evidence of fair market value as of the valuation date. This latter point is important because some courts do not use subsequent Subsequent Events—Exceptions 21 12 T.C. Memo. 1996-331. 13 101 T.C. 412 (1993). events to determine fair market value initially, but rather use such later-occurring events to affirm their fair market valuation conclusions, provided that the events were foreseeable and relevant. 14 The Federal Circuit weighed in on the issue recently, in Okerlund v. United States: 15 Valuation must always be made as of the donative date relying primarily on ex ante information; ex post data should be used sparingly. As with all evidentiary submissions, however, the critical question is rele- vance. The closer the profile of the later-date company to that of the valuation-date company, the more likely ex post data are to be relevant (though even in some cases, they may not be). The greater the significance of exogenous or unforeseen events occurring between the valuation date and the date of the proffered evidence, the less likely ex post evidence is to be relevant—even as a sanity check on the assumptions underlying a valuation model. 16 In Okerlund, the issue was whether estate plan provisions requiring the purchase of stock upon the decedent’s death were properly included as affecting value when the stock was gifted to decedent’s children, two years prior to the decedent’s untimely (and unexpected) demise. The Court of Federal Claims held that it should not have been included as an item of value when the stock was gifted because there was no reason to believe the decedent would pass away in the near future. The Federal Circuit affirmed. The subsequent event of decedent’s demise was held not relevant to determining the correct value at the time of death, although the court did say that such evidence could be considered, if relevant. The question, at least in the Federal Circuit, is thus what subsequent events may be rel- evant to judging the correctness of a valuation. One Eighth Circuit case is instructive on the issue, if not dispositive. In Polack v. Commissioner, 17 the taxpayer wished to introduce subsequent (unaudited) financial statements to support his valuation. The court refused to consider this evidence, holding that the statements were not relevant because an arm’s- length buyer could not have relied on them had she purchased the business in the year it was valued. 18 The following formula may be considered as a starting point when adjusting for subse- quent events: Value at valuation date + Inflation +/– Industry changes, or changes in expectations regarding industry +/– Changes in business component results if relevant in time and type +/– Societal changes, such as changes in technology, macroeconomics, or tax laws +/– The actual occurrence (or lack thereof) of an event included (excluded) from original valuation, if relevant in time and type +/– The occurrence or nonoccurrence of any other events or facts that an arm’s-length buyer could have reasonably foreseen had she purchased the business in the year of valuation = Adjusted valuation 22 SUBSEQUENT EVENTS 14 See, e.g., Estate of Fitts v. Comm’r, 237 F.2d 729, 731 (8th Cir. 1956); Estate of Myler v. Comm’r, 28 B.T.A. 633 (1933). 15 93 365 F.3d 1044 (Fed. Cir. 2004). 16 Id. at 1053. 17 T.C. Memo 2002-145. 18 Id. at 612. One will note that the key to many of these adjustments is relevance, as dictated by the Eighth Circuit and the Federal Circuit. Rule 401, Federal Rules of Evidence, defines relevant evidence as evidence having any tendency to make the existence of any fact that is of conse- quence to the determination of the matter more or less probable than it would be without the evidence. Relevance is a legal concept beyond the scope of this book, but there is a plethora of case law on relevance and its limitations. 19 Two types of relevance have been identified by the courts thus far: relevance in time and relevance in type. Relevance in time means that the event is not so far removed from the valu- ation date as to have been unforeseeable. Relevance in type means that the subsequent event is similar to something that was foreseeable and predictable as of the valuation date. Okerlund and Polack shed some light on this inquiry, but valuers, if they choose to do so, must carefully consider all relevant factors in determining the impact, if any, of subsequent events. The formula just given is merely offered as a starting point, should the client wish to consider subsequent events. It is by no means exhaustive, and the valuer should be guided in its application by her experience and the facts of the valuation. Subsequent Sales Sometimes, courts allow subsequent events such as sales of the actual property or comparable properties to be used in determining fair market value. This is so even if the sales were not foreseeable as of the valuation date. This exception seems to be founded in the belief that the sale of the actual or comparable property is such strong evidence that it is worthy and there- fore reliable evidence of fair market value. 20 CONCLUSION Events subsequent to the valuation date should not be taken into consideration when valuing business interests, unless at least one of these five conditions is true: 1. The subsequent events were reasonably foreseeable as of the valuation date. 2. The subsequent events are relevant to the valuation, and appropriate adjustments are made to account for the differences between the valuation date and the date of such subse- quent events. 3. The subsequent events are not used to arrive at the valuation, but to confirm the valuation already concluded. 4. The subsequent events relate to property that is comparable to the property being valued, and the subsequent events are probative of value. 5. Subsequent events may be evidence of value rather than as something that affects value. Conclusion 23 19 Estate of Gilford v. Comm’r, 88 T.C. 38 (1987); Krapf v. United States, 977 F.2d 1454 (1992); Krapf v. United States, 35 Fed. Cl. 286 (1996). 20 Estate of Jung, supra note 13, at 431–432 (as evidence of value rather than as something that affects value—later- occurring events are no more to be ignored than earlier-occurring events). Chapter 3 Business Valuation Experts Summary Introduction Proving Business Value The Expert Appraiser Types of Experts Various Roles of Experts Business Valuation Litigation Witnesses Lay Witnesses Expert Testimony Admissibility of Evidence Underlying Expert Opinions Limitations to Admissibility Hearsay Scope of Expert Testimony Reliability of the Expert Minimum Thresholds for the Business Valuation Expert Sarbanes-Oxley Act of 2002 Attorney Assistance to the Expert Qualified Appraiser Concerns about Expert Testimony Court-Appointed Expert Conclusion Appendix: Expert Credentials and Qualifications SUMMARY This chapter covers the use of business valuation experts in valuation controversies. To qual- ify under the Federal Rules of Evidence (FRE) as an “expert” in business valuation, the ap- praiser must have sufficient training or experience. Preferably, the expert also will be certified by one of the relevant accrediting bodies. See the appendix at the end of this chapter for a de- tailed discussion of expert certifications. Certification recognizes that the expert, whose job it is to render an opinion on valuation issues, is qualified to do so. Before trial, the expert will compile all of the information she needs, review it, and render a written opinion as to value. This opinion will then be presented to the trier of fact. Effective use of experts requires five conditions: 1. The expert must be qualified to perform the necessary analysis and formulate the needed expert opinions. Appraisers are specialists, and it is important to select the right one for the job. An accredited appraiser is almost inevitably more qualified than one who is not. 24 2. The expert has credibility with the court. Credibility means that the expert is worthy of belief. One way in which credibility of the witness may be discovered is by researching prior cases where the expert has testified; courts often comment on the qualifications and reliability of the expert, providing a treasure chest of knowledge on the consistency and thoroughness of that expert. 3. The expert refrain from advocacy. In theory, the expert is a dispassionate analyst who will guide the trier of fact to truth, even if that truth conflicts with the client’s position. In prac- tice, expert opinions are perceived to be purchased by the word, lessening their credibility. Attorneys should thus refrain from making the expert nothing more than a surrogate advo- cate for the client’s position. Because of these concerns, some courts are now avoiding the expert-advocate problem altogether by appointing their own experts under FRE 706. 4. If the expert is a public accountant, it is recommended that she refrain from providing audit and valuation services at the same time. The Sarbanes-Oxley Act could be read to prohibit an accountant from serving in both valuation and audit capacities. Good practice suggests that accountants should refrain from valuing a business they are con- temporaneously auditing, pending clarification from the Securities and Exchange Commission (SEC). 5. The expert must offer reliable and relevant analysis and opinions. INTRODUCTION Taxpayers frequently need to prove business value for a variety of transactions, such as buy- outs, mergers, or gifts. Business valuations are also required as part of many tax-reportable transactions and in a multitude of business transactions that must be valued before the transac- tion can be consummated. PROVING BUSINESS VALUE How do you prove the value of a business? There are a multitude of factors that enter into the establishment of business value. For in- stance: earnings, assets, liabilities, cash flow, economic conditions, competition, technological advancements, and local, regional and world events may all affect valuation. 1 By themselves, or even in combination, however, these factors do not prove value; at best, they are limited indicators of value. Someone is needed to identify and assimilate the correct valuation indicators, to interpret them, and to formulate an opinion as to valuation. In many tax-related valuations, taxpayers perform their own valuations or utilize the ser- vices of anyone who claims some knowledge of valuation. Many tax forms require little, if any, information about who performs the valuation. On other tax forms, taxpayers can perform their Proving Business Value 25 1 Rev. Rul. 59-60 lists the following as factors to be considered when arriving at business value: (a) the nature of the business and the history of the enterprise, (b) economic outlook, (c) book value, (d) earning capacity, (e) dividend- paying capacity, (f) goodwill or intangible value, (g) comparable sales, and (h) comparable companies. See Chap- ter 22. [...]... Chapter 24 27 Cecil & Willging, supra at 52, 56 Id at 20 21 29 Gross, “Expert Evidence, 1991 Wisconsin Law Review 1113, 122 0– 122 1 (1991) 30 Judge Learned Hand, “Historical and Practical Considerations Regarding Expert Testimony,” 15 Harvard Law Review 40 (1901) 28 42 BUSINESS VALUATION EXPERTS APPENDIX: EXPERT CREDENTIALS AND QUALIFICATIONS There are no mandatory criteria for qualifications of business. .. Herndon Parkway, Suite 125 Herndon, VA 20 170 Phone: (800) 27 2- 825 8 or (703) 478 -22 28 Fax: (703) 7 42- 8471 E-mail: asainfo@apo.com Web site: www.appraisers.org BV Discipline Web site: www.bvappraisers.org Contact: Jerry Larkins, Executive Vice President; (703) 733 -21 08; jerry@appraisers.org Association for Investment Management and Research (AIMR) P O Box 3668 Charlottesville, VA 22 903-0668 Phone: (434)... Fax: (434) 951- 526 2 E-mail: info@aimr.org Web site: www.aimr.org CFA Institute (Formerly Association for Investment Management and Research [AIMR]) 560 Ray C Hunt Dr Charlottesville, VA 22 903 -29 81 Phone: (800) 24 7-81 32 (U.S and Canada) or (434) 951-5499 (outside the United States and Canada) Fax: (434) 951- 526 2 E-mail: info@cfainstitute.org Web site: www.cfainstitute.org Institute of Business Appraisers... of the Institute of Business Appraisers Master Certified Business Appraiser (Institute of Business Appraisers) Appendix: Expert Credentials and Qualifications Exhibit 3.3 Professional Association Contact Information American Institute of Certified Public Accountants (AICPA) 121 1 Avenue of the Americas New York, NY 10036-8775 Phone: (888) 777-7077 or (21 2) 596- 620 0 Fax: (21 2) 596- 621 3 Web site: www.aicpa.org... properly be arrived at from consideration of all the evidence (citations omitted). 12 11 Estate of True et al v Comm’r, T.C Memo 20 01-167 Id at 20 5 12 Minimum Thresholds for the Business Valuation Expert 33 MINIMUM THRESHOLDS FOR THE BUSINESS VALUATION EXPERT There are no absolute mandated standards to qualify an individual to be a valuation expert, with the exception of the rules laid down in Regulation section.. .26 BUSINESS VALUATION EXPERTS own valuations without even having to describe the method used to estimate value This loose valuation policy contributes to inconsistency and unreliability in business valuation In many cases, however, estimating the value of an interest in a closely held business is beyond the competency of anyone who is not a professional (and credentialed) business appraiser... Chartered Business Valuators (CICBV) 27 7 Wellington Street West, 5th Floor Toronto, Ontario M5V 3H2 Phone: (416) 20 4-3396 Fax: (416) 977-8585 E-mail: admin@cicbv.ca Web site: www.businessvaluators.com 47 Chapter 4 Sources of Law and Choice of Courts Summary Structure of the American Legal System The Constitution, Statutes, and Regulations The Courts: Statutory Interpretation and Common Law Tax Law The... correctness of their opinions, wasting the time and wearying the patience of both court and jury, and perplexing, instead of elucidating, the questions involved in the issue .20 The literature and case law are replete with discussions concerning the problems associated with expert opinion .21 Among the noteworthy concerns are these: • • 20 Experts who abandon objectivity and become advocates for the side that... Customarily, the best procedure to prove business value for federal tax purposes requires that a professional person—someone skilled, educated, and experienced in understanding and analyzing the various factors pertaining to valuation express an opinion of value That opinion must be based on careful and thorough research of the events and circumstances surrounding the business valuation object or event... conclusions of the expert if it cannot be shown that the underlying data and facts, together with the analysis of such data, logically lead to the opinions derived therefrom SARBANES-OXLEY ACT OF 20 02 On July 30, 20 02, President Bush signed into law the Sarbanes-Oxley Act of 20 02 The Act was passed by Congress in response to various accounting scandals, creating a new federal oversight board for the purpose . SUBSEQUENT EVENTS 1 Reg. § 25 .25 12- 1. 2 Reg. § 1.170A-1(b). 3 Reg. § 20 .20 31-1(b); Code §§ 20 31(a), 20 32( a). 4 Grill v. United States, 303 F.3d 922 (Ct. Cl. 19 62) . 5 27 9 U.S. 151 (1 929 ). See also First. omitted). 12 32 BUSINESS VALUATION EXPERTS 11 Estate of True et al. v. Comm’r, T.C. Memo. 20 01-167. 12 Id. at 20 5. MINIMUM THRESHOLDS FOR THE BUSINESS VALUATION EXPERT There are no absolute mandated standards. purchased the business in the year of valuation = Adjusted valuation 22 SUBSEQUENT EVENTS 14 See, e.g., Estate of Fitts v. Comm’r, 23 7 F.2d 729 , 731 (8th Cir. 1956); Estate of Myler v. Comm’r, 28 B.T.A.