IRS Revenue Ruling 59-60 Compliant

The Internal Revenue Service Revenue Ruling 59-60 sets out the standards for valuations that are submitted to the IRS for estate and gift tax returns. The basic requirements are that:

  1. 1. The valuation analyst must review the recent financial history of the business.
  2. 2. Unless there is a very comparable market comparable valuation result available for use, the valuation analyst should use at least two methods to value the business.
  3. 3. The valuation analyst should use his/her judgment about how to weigh the multiple results to get a final number.

Service Details

Valuation Method:

The Discounted Free Cash Flow method and Private or Public company Market Comparables for Revenue and EBIDTA where available are appropriate for the analysis.

Valuation Results:

  • - Total Fair Market Value (includes Control Premium and Liquidity Discount)
  • - Minority Value (Value of Ownership Equity without Control Premium)
  • - Total Fair Market Value and Total Minority Value Per Share

Information Request:

  • - Stockholder agreement and buy-sell agreement (if available)
  • - Up to five years of business tax returns and financial statements
  • - Company marketing brochures, price lists, catalogs, and/or company website URL
  • - Organization chart and management roles and responsibilities (where already prepared)
  • - List of major customers by sales
  • - Company business plans, projections of future revenue and earnings (where already prepared)
  • - Previous business, equipment, or property valuations or offers to purchase

Valuation Interview:

Axiom Valuation staff conducts a preliminary review of the company information and then schedules an interview with the client or the client’s designated representative. The valuation interview topics include:

  • - Review of the company’s history, corporate documents, and most recent five-year financial performance
  • - Review of company’s operating and non-operating assets
  • - Determination of the appropriate NAICS/SIC code industry designation(s) for the company’s line(s) of business
  • - Review of economic, regional, and industry factors impacting the company
  • - Review of how the company sells its products or services, key customers, and competitors
  • - Review of existing business plan projections, if any, and determination of a reasonable projection for revenue and profit growth
  • - Discussion of company’s long-term competitive advantage
  • - Review of owner discretionary expenses and possible non-recurring expense or revenue items
  • - Review of firm-specific risks, including customer concentration, supplier reliance, and key person reliance
  • - Review of comparable company sales in this industry

The objective of this review is to finalize the inputs and key assumptions to use in developing our preliminary valuation results and preparing a draft report.

Draft Valuation Report:

Axiom Valuation e-mails the draft report to the client and/or the client’s designated representative, and then schedules a follow-up phone discussion.

Review:

A senior Axiom Valuation staff member discusses the draft results and conducts a Q&A session with the client and/or the client’s designated representative. Any necessary corrections are made in a timely manner.

Business Valuation Report:

The Certified Valuation report is 60+ pages long. We provide two hard-copy Business Valuation Reports in customized binders as well as an electronic version of the report in an Adobe Acrobat PDF file.

Additional Questions:

Phone support for questions after final report delivery is included in this service.

Updates:

A certified update service is available at a reduced price, for businesses where there have been no material changes in markets served or comparable companies since the last Axiom Valuation certified valuation. Please contact us for a quote.

Click here for a Sample Certified Valuation Report.