Business Owners Applications and Definitions
Business owners rely on the solid values provided in a certified appraisal report prepared by a CMEA when addressing the applications listed below.
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1031 Exchanges are one of the best-kept secrets of the IRS. Assets require a proper valuation when deferring taxes for a like-kind exchange to pass IRS scrutiny.
Book value is typically inaccurate and outdated, unlike fair market value which gives a solid current value conclusion. If machinery and equipment are not appraised correctly, the entire business valuation is skewed, potentially putting a business at risk and increasing its liability.
When a business sells its assets, fixed and tangible assets often must be valued separately from the business’ intangible assets.
C Corp to S Corp Conversions
The federal tax code requires an appraisal of the assets to convert from a C Corporation to an S Corporation.
Cost segregation is a process that identifies personal property assets and assigns a substantiated taxable value to maximize a depreciation deduction. These assets are often buried in real property assets, and a certified report is required to verify these values.
When a partnership dissolves in business, the value of the tangible assets acquired during the relationship must be professionally appraised to obtain an accurate value to use during the settlement.
When a couple who own a business decides to divorce, the courts will seek to divide the value of the business between the parties requiring a business valuation. A business valuation will assign substantiated values to both tangible and intangible assets if required.
Taxpayers must obtain a qualified appraisal to substantiate deductions for some charitable contributions due to the Pension Protection Act of 2006 regarding non-cash donations. In general, a taxpayer needs a qualified appraisal for many types of non-cash donations that hold a value of more than $5,000. The PPA requires this to be a professional appraisal guided by the generally accepted appraisal standards.
Employee Stock Ownership Plans (ESOPs)
When a business has or is considering an employee stock ownership plan, (ESOP), it is important first to know the initial asset values by obtaining an accurate appraisal of tangible assets like machinery and equipment. These values must be based on the current, fair market value rather than book value which is not accurate and will not hold up should there be a dispute.
Legal trusts and wills must contain accurate property values to ensure assets are distributed appropriately when settling an estate.
A certified appraisal report of tangible assets is required when a business owner is seeking to obtain the maximum loan amount from a lender. Businesses often use their tangible assets as collateral to support these loans, and typically the loan amount is derived from 40-60% of the value of the pledged assets.
Businesses purchase liability insurance in case of an event such as a fire or theft but often neglect to protect their assets by obtaining a certified appraisal report. This report provides an independent and substantiated account of a business’ assets in the event these values need to be proven to an insurance company for reimbursement. Further, if the assets were used as collateral, tangible assets would need to be appraised properly to cover their value if a loss should occur.
Many businesses lease equipment and are offered a purchase option at the termination of the lease. This option typically stipulates fair market value as the buy-out price. We can help determine this value and assist in purchase negotiations.
When your client is liquidating their business, they must have accurate reports regarding their assets. Solid values will ensure a smooth transition from business ownership to liquid cash.
Our certified appraisal reports will help win your case by providing substantiated facts that will hold up to the highest scrutiny.
Personal property taxes are assessed based on market value. At times, a business owner and local municipality may disagree regarding the market value so a certified machinery and equipment appraisal would be necessary to settle the dispute.
For a business owner, retirement planning requires careful consideration of the true value of a business’ assets. These assets may be systematically liquidated to fund for retirement. A certified appraisal report would also be necessary when selling the business, providing substantiated value necessary for the transaction.
Since the U.S. government created the Public Company Accounting Reform and Investor Protection Act of 2002 (also known as Sarbanes-Oxley), business owners must be careful to adhere to the new certified standard of accounting for assets. All tangible assets must be valued and substantiated.
A certified appraisal report is necessary to provide substantiated values for those involved in trust agreements.