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We have distilled decades of experience at the intersection of law, business and finance into a suite of articles to help our clients make sense of business valuation, forensic accounting, and litigation support. Please visit our site regularly for our latest content.

  The news cycle is currently inundated by the testimony of medical professionals of various backgrounds and experience, and as we have seen, their opinions and advice can starkly differ. While many have advocated for social distancing and the use of masks, others have sought to cast doubt on the productivity of these measures, claiming either that they are unnecessary or that they have no impact on the virus’s transmissibility. Recently, lawyers for the CT Freedom Alliance offered two medical expert witnesses that were subsequently rejected on the basis that neither was sufficiently qualified to serve as an expert. In response to one individual’s previous attestations that viruses are nonexistent and vaccines poisonous, Judge Thomas G. Moukawsher expressed his clear inclination that established scientific evidence should not be disputed. This is an extreme example but one that bears mentioning. Judges are frequently confronted with radically opposing partisan expert opinions. Irrespective of their familiarity with the subject at hand, they must decide as to which opinion is most correct. With regards to COVID-19 and the preventative measures thereof, there are a sufficient number of credible and widely circulated opinions as to make the credibility (or lack thereof) of witnesses such as those described above relatively obvious. But what of matters that concern subjects that aren’t so broadly known? Let us take for example the industry accepted principles and standards in business valuation. In a matrimonial, shareholder, or estate dispute, it is often that both parties hire a business valuation expert. Occasionally, […]


Analytical Tools For Attorneys

Posted in Business Valuation, on Sep 2020, By: Mark S. Gottlieb

  For those of you familiar with our valuation and forensic reports, you know first-hand that we use various tools to analyze and illustrate the financial capacity of a subject company. To examine financial characteristics, we often compare the subjects’ financial ratios to their peer group. For example, the subject company may report travel and entertainment expenses as 5.0% of annual sales. If the subject company reports T&E at 15.0% of sales, further investigation may indicate that this category contains excess owners’ perquisites. To illustrate these and other financial trends, we use charts and other demonstratives. One of my favorite analytical tools is a SWOT analysis. SWOT is an acronym that stands for strengths, weaknesses, opportunities, and threats. Strengths and weaknesses generally refer to: • Financial resources (funding, sources of income, and investment opportunities) • Physical resources (location, facilities, and equipment) • Human resources (employees, volunteers, and target audiences) • Access to natural resources, trademarks, patents, and copyrights, and • Current processes (employee programs, department hierarchies, and software systems) While opportunities and threats consider: • Market trends (new products, technology advancements, and shifts in audience needs) • Economic trends (local, national, and international financial trends) • Funding (donations, legislature, and other sources) • Demographics • Relationships with suppliers and partners • Political, environmental, and economic regulation We commonly illustrate the SWOT analysis in chart form, which draws the reader’s attention to those areas of greatest significance. Another tool we frequently use is Michael Porter’s Five Forces theory. For those of […]


Do You Remember When Alimony Was Deductible?

Posted in Divorce & Matrimony, on Sep 2020, By: Mark S. Gottlieb

As the summer nears its conclusion, those individuals that previously applied for an extension to file their 2019 individual income tax returns are becoming increasingly aware of the impending October 15th deadline. Couples that divorced after the Tax Cuts and Jobs Act (TCJA) of 2017 are already cognizant of the changes affecting alimony.   Before the TCJA, alimony received was taxable to the recipient, and deducted, dollar for dollar, by the payer in the determination of their adjusted gross income. Thus, deductibility of alimony historically provided specific incentives in negotiating a divorce settlement. For couples divorcing after the TCJA, the payment and receipt of alimony is neither deductible nor taxable. In many instances, this change has created a significant tax burden for those paying alimony. While this change has been effective now for several years, our firm still get requests from attorneys to quantify the lost tax benefit resulting from the change in the tax law. Today, we revisit how this change affects those paying alimony. Let us take for example a taxpayer (filing single and utilizing the standard deduction) who earns a salary of $75,000 per year and pays annual alimony of $21,000. As the following table illustrates, the taxpayer’s income tax liability will increase by $6,700 or 71.3% resulting from of the tax law change. OLD LAW NEW LAW Wages $ 75,000 $ 75,000 Alimony 21,000 0 Adjusted Gross Income 54,000 75,000 Standard Deduction Filing Single Taxable Income $ 41,800 $ 62,800 Federal Taxes 5,100 9,700 NY State […]


  Despite the recent partial rebound of the stock market, the economic realities developed in the second quarter of 2020 is having a devastating effect on the economy.  Unemployment is at an alarming rate, several prominent businesses have declared bankruptcy, and many businesses, small and large, are debating their future.  That being said, this new reality may provide estate planning opportunities to reduce gift and estate taxes.  In this blog, I’d like to discuss the valuation of promissory notes and how their valuation may be affected during times of economic hardship. Promissory notes are commonly used to transfer assets between family members.  Sometimes these notes are part of a gifting program; other times, it may be an asset of an estate.  In either instance, the note needs to be valued. Standard of Value The standard of value in gift and estate matters is fair market value. Fair market value is defined in Revenue Ruling 59-60 [2.2 Section 20.20231-1(b) of the Estate Tax Regulations (Section 81.10 of the Estate Tax Regulations 105) and Section 25.2512-1 of the Gift Tax Regulations (Section 86.19 of Gift Tax Regulations 108)] as “the price at which the property would change hands between a willing buyer and a willing seller when the former is not under any compulsion to buy, and the latter is not under any compulsion to sell, both parties having reasonable knowledge of relevant facts.” The fair market value standard assumes that the price is transacted in cash or cash equivalents. Court decisions […]


  Many law firms and their clients have applied for the available federal and local loan and grant programs. Despite the promise for quick financial assistance, many businesses (including law firms) still face financial difficulties due to the Coronavirus Pandemic.  The Payroll Protection Program (“PPP”) was established to provide immediate financial assistance to businesses that employ five hundred employees or less. The money set aside for the PPP was entirely distributed within days after the application process began.  We are now hoping that the government replenishes the program. As it turned out, a significant amount of this money was disbursed to businesses that technically meet the SBA’s criteria, but are actually much larger companies, which are not intended to benefit from this stimulus package. Companies, such as Shake Shack, are returning the $10 million it received in the hopes that the money will be redistributed.  Shake Shack is not the only large company to have benefited from having the infrastructure to quickly get ahead of the line for this money earmarked for small businesses. The realization that our economy’s financial weaknesses are now being exposed.  Despite the prior peaks in the stock market, it is now clear that the adage: “What’s good for General Motors is good for America,” is just not true. Despite the current financial assistance being offered, tens of millions of workers are now unemployed, and many businesses are not expected to withstand the financial pressures caused by the current business interruption. Individuals and business owners are […]


  Last week’s blog inspired a lot of conversation regarding the economic impact of the coronavirus virus.  I have received numerous phone calls and emails from attorneys and business owners inquiring about our damage calculation services. Yesterday, my wife and I took a short walk near our New York City apartment.  As we witnessed many store owners covering their windows with plywood in anticipation of their planned “temporary closure,” I wondered how many of these businesses would be able to weather the storm of this pandemic. Our firm just reached our 30th anniversary.  During this time, we have worked with businesses of various sizes and sophistication. One of the differences between the two, other than size, is that these businesses often differ by their access to capital. Small and medium-sized companies have always been considered riskier by lenders and investors.  Many of those small business owners whose shops line Main Street, USA are covering their windows with plywood panes, and many may never open again. Only time will tell as to which ones survive. With that being said, your business clients may now be considering filing a damage report.  This analysis may look to calculate either lost profits or lost business.  In either case, the objective is to restore the plaintiff to the position it would have been – “but-for” the event that caused the damages. Lost Profits When calculating lost profits, damages are typically measured for a specific or limited period of time. In general, the loss is the […]


  Like you, I woke up today to numerous news programs discussing the coronavirus. Aside from the health concerns, it has become apparent that businesses, large and small, national and local, are being affected.  Some have stated that this week’s events have the potential to be the most catastrophic economic challenge in generations. With no immediate correction anticipated, business owners may be considering filing a business interruption claim. Business interruption insurance can provide much-needed assistance when disaster strikes. But filing a claim requires detailed analysis and documentation to allow the business owner to focus on recovery efforts. What’s covered? Most business interruption policies require the insured to file a detailed “proof of loss” within a short period (30 days, for example) after a loss occurs. But before estimating losses, it’s critical to review the scope of coverage. Policies typically reimburse the insured for lost business income (profits) during the loss period. Some also offer more extensive coverage.  Here are just a few examples. Extraordinary expenses. Some policies will reimburse the insured for repairing damaged inventory and equipment, as well as the cost of operating the business at a temporary location until the original location is restored. “Denial of access” losses. This can occur when a natural disaster or other incident causes governmental authorities to block access to a company’s property for security reasons, even if the property isn’t damaged. Rebuilding costs. Depending on the policy language, some courts have found that the insured should be reimbursed for the extra cost […]


  The NBA & NHL have suspended play. MLB has postponed the start of its season. Public & private schools around the country are closing. Locally, the NYC St. Patricks’ Day parade and other large public gatherings are canceled, amongst the rumors surrounding that the city will order a mandatory quarantine. These are just a few of the headlines we have heard and read this week in response to the current coronavirus pandemic. The health of our family, friends, and neighbors is paramount at this time. Still, as the stock market seems to be in freefall, one can only wonder what impact the coronavirus will have on the short-term and long-term valuation of closely-held businesses. The micro and macroeconomic communities have experienced this turmoil before. Of course, there was 911 and the financial crisis of 2008, but when was the last time the spokes on the economic wheel have slowed down or stopped because people were either too sick to work or discouraged from going to work?  Yes, many of us will be able to work from home; but let’s be honest – it will not be the same. Local restaurants and attractions expect to see a drastic decrease in business; the travel and hospitality business is flooded with cancellations, despite offering services at unheard-of low prices. (Someone told me you could fly to Florida this weekend for $50.) If you are one of our frequent readers, you are familiar with the three general methods of valuation, the asset, market, […]


  Are loans due to or due from shareholders a bona fide debt obligation, a form of equity capital, or a hybrid of the two? This distinction is relevant when valuing a business – particularly in a shareholder dispute or in a divorce case. I customarily devote a good portion of class time discussing this issue in my class at Fordham Law School. This distinction may cause a material difference in the ultimate valuation of a closely-held business or even the income attributed to its owner. Often, experts turn to the Internal Revenue Service for objective guidance on this issue. What Would The IRS Say? Owners occasionally borrow funds from their businesses, say, to pay a child’s college costs or provide a down payment on a vacation home. These loans to shareholders appear on a company’s balance sheet as a receivable. For loans of more than $10,000, the IRS requires taxpayers to treat the transaction as a bona fide debt. Then the company must charge the shareholder an “adequate” rate of interest. Each month the IRS publishes its applicable federal rates (AFRs), which vary depending on the term of the loan. If the company doesn’t charge interest or follow a complicated set of below-market interest rules to impute interest on the loan, the IRS may claim the shareholder received a taxable dividend or compensation payment rather than a loan. The company may deduct the latter, but it will also be subject to payroll taxes. However, both dividends and additional compensation […]


  Our firm was recently retained to determine the fair value of a minority interest in a business for a shareholder dispute. Despite it being a sizable business, the owners never got around to memorialize the termination terms within its shareholder’s agreement.  Hence, one of the reasons for the current litigation is to address its value. This business had grown organically over the years and by acquiring multiple competitors.  It is now at a size that there are enough comparable sales transactions to consider under the market approach. In reviewing these transactions, we noted components to the deals that needed to be considered to address its cash equivalent value. When reviewing the file, I thought of two adages learned in business school relating to the time value of money. The first, “a dollar today is worth more than a dollar tomorrow” and second, “a bird in the hand is worth two in the bush”. How does this concept relate to business valuation? When the value of a business utilizes the sales of comparable companies under the guideline merger and acquisition (M&A) method, it’s important to understand the cash-equivalent value of comparable transactions. Creative deal terms can make a deal more (or less) valuable than it may appear.  Some of these terms may include installment payments, earnout provisions, and contractual agreements such as employment/consulting contracts and/or covenants not to compete. The following discusses a few of these issues that may affect the selling prices found within these transactions. Installment Contracts In […]