Estate taxes and proper estate planning are an important consideration for all New Hampshire closely held business owners. A successful small business recently asked how the IRS will establish “fair market value” for their closely held business that is governed by a buy-sell agreement.
When considering the interests, the IRS and the courts take into account discounts such as marketability discounts, minority discounts and built-in gains discounts. These discounts are a so-called reduction from the otherwise fair market value of the business interest being valued. These discounts are discussed below:
Generally, valuation discounts are determined by a qualified business appraiser. It is critical to work with a qualified appraiser before the gift or estate tax return is filed. A qualified appraiser will not have a financial interest in the outcome and will have had substantial experience in appraising similar companies and in testifying in court (if necessary). The appraisal report should include:
If you have questions about buy-sell agreements, estate planning and business succession planning you can contact Attorney John S. Polgrean of the Trust and Estates department of Welts, White & Fontaine, P.C. at (603) 883-0797.
Author: Attorney John S. Polgrean
This blog is intended for informational use only. The information contained herein should not be construed as offering legal advice or a legal opinion. At Welts, White & Fontaine, P.C. our lawyers have experience with representing families and closely held businesses. We have balanced business plans with family and estate plans and we can help you develop strategies for a successful family owned business.