Blog

Yearly Archives: 2011

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.

If you are representing clients in divorce proceedings, innocent spouse relief can help you to protect your clients from liability for underpayment or nonpayment of taxes caused by their spouse’s dishonesty. Innocent spouse relief provides an important source of relief from tax debt, but until recently, there were significant limitations on when innocent spouse tax relief could be claimed.  The IRS recently lifted some of these limitations and the changes that were made can help you to make sure your client doesn’t become unfairly burdened with his or her spouse’s tax debts. On July 25, 2011 the IRS issued Notice  2011-70, which made a significant change to the requirements for those seeking innocent spouse relief under (IRC Section 6015(f). IRS Commissioner Douglas Shulman indicated that the change was made because “when people are in tough circumstances, we [The IRS] need to be willing to work with them.” Taxpayer Advocate Nina Olson has indicated that the change was a “a welcome occasion where everybody has emerged a winner.” The changes made by the IRS are simple – they extended the eligibility period for those seeking equitable relief, lifting the previously enforced two-year limit. Mark S. Gottlieb recently wrote a white paper entitled, An Attorney’s Guide to the Recent IRS Changes Regarding Innocent Spouse Relief.  This is a must read for all matrimonial and family law practitioners. This white paper is part of a 3 part special issue for all matrimonial practitioners. Part 1 – An Attorney’s Guide to Divorce-Related Tax Issues. Part 2 […]


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Valuing Small Businesses

Posted in Business Valuation, on Mar 2011, By: Mark S. Gottlieb

Valuing the very small company can often be more challenging than valuing a large firm or corporation.  These types of valuations most commonly arise in the divorce cases, although they also are frequently present in shareholder litigation, partnership dissolutions, and similar litigation. Often, client budgetary restrictions are an overriding consideration. However, attorneys and valuation analysts can work together from the outset of an engagement to meet client budgets and provide credible valuation. Here are a few areas where communication and cooperation can be the most helpful. Valuation Standards.  Just like attorneys, accredited valuation experts are bound by standards of professional conduct. However, none of those standards distinguish between a valuation for a small business (and perhaps small budget) and a larger business. Once engaged, valuation analysts often find themselves caught between performing a complete and credible valuation, complying with the applicable standard(s), and keeping the job within a client’s budget. In litigation settings, most valuation analysts expect to be cross-examined on whether they adhered to the proper standards. If not, a lack of client funds will be no defense, and the analyst’s credibility as well as the client’s case could suffer. Managing Expectations. Proper client screening is just as important in the valuation as in the legal context. Valuation analysts can help retaining attorneys to inform the client why the appraisal is necessary, its potential costs and the benefits that will inure to the case. Clients—especially in the divorce setting—will often suffer from misplaced expectations or assumptions. These clients need to receive the proper information and guidance from their […]


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The Joint Appraiser's Role in a Divorce Action

Posted in Divorce & Matrimony, on Feb 2011, By: Mark S. Gottlieb

In these economically challenging times, parties are increasingly seeking ways to reduce the cost and conflict of divorce. Many attempt to streamline the process by retaining a joint expert/valuator to appraise the marital business and/or business interests. Indeed, there are numerous benefits. Consider, for instance, that without a joint appraisal, many non-business owning spouses or those without direct access to marital funds would not be able to afford any expert in the case. In addition to the added financial benefit of retaining a joint expert, The evaluator is also likely to get better access to documents and other evidence than an expert who has been retained by one party or another, The evaluator can often take on the role of creative problem solver, coming up with financially efficient, resourceful solutions, The parties and their attorneys frequently view the joint appraiser as more independent and objective, and can use the joint expert to expedite mediation and settlement. Attorneys avoid any pitfalls by clearly explaining to their clients the differences between retaining a sole expert and a joint expert. This will help clients from feeling “betrayed” later on in the case—when, for example, the appraiser may spend more time with the business-owning spouse to obtain information and financial records; or when the appraiser’s opinions conflict with the owner’s perception of the business’ value. It is important for the legal practitioner to become acquainted not only with appraisers who have experience as joint experts, but also those who also have some mediation or […]


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Valuation Issues in the Bankruptcy Process

Posted in Financial Advisory, on Feb 2011, By: Mark S. Gottlieb

When it comes to business bankruptcies, the numbers seem to loom larger with every year. From 2005 through 2008, annual business bankruptcies increased by over 200%. In the years 2009 and 2010, business bankruptcies were more than double for the years 2006 and 2007. We have seen bankruptcy filings from businesses with long histories such as the 163-year-old Tribune Company, or, more recently, younger companies as Blockbuster, whose goal is to cut its debts from $900 million to $100 million, and Circuit City, which seems to be finding a second life online of late. No matter what the size of the company or its reputation, however, valuation plays a key role in the bankruptcy process; and, inevitably, valuation issues will arise. These issues pervade throughout the entire bankruptcy process–and impact each of the stakeholders along the way. While it is the attorney’s job to reach legal conclusions as part of the valuation, fairness or solvency analyses, the valuation analyst may serve debtors, creditors and legal counsel as either a consulting expert or a testifying expert. Whether a valuation expert uses one or all three of the accepted methodologies—the income approach, the sales or company comparison approach, or the cost approach–they are influenced by data and assumptions used under the formulas. A company typically elects to file for bankruptcy under Chapter 7 of the Code when continued business operations cannot be supported by the income the company is generating. If a company does elect to file a Chapter 7 bankruptcy petition, […]


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Attorneys know that a credible valuation analysis requires a substantial number of hours by an analyst with a high level of expertise. When reviewing an expert valuation report, it is critical to identify the most common errors that can cause a court to discredit or even disregard a report. The following checklist serves as a quick guide for attorneys to avoid the most obvious deficiencies: Is the standard of value followed?  Has the analyst carefully disclosed and defined the applicable standard of value?  Has the standard of value been followed consistently throughout? Are all three valuation methods considered?  These include the income, market, and asset approaches. Is the internal analysis consistent?  For example: Did the analyst match pricing multiples or capitalization rates to the wrong economic income measure? Are current intangible asset operational data matched to different time periods, without appropriate adjustment? Did the analyst “normalize” financial statements without also normalizing the corresponding data for selected comparable companies? Was a “highest and best use” analysis performed? Was an “actual use” analysis also performed? Did the analyst make extraordinary, subjective, or speculative assumptions? Is there sufficient support for selected variables?  Any analyst should document the data used, the procedures performed, and the valuation conclusions reached.  There should also be sufficient tracing from the data in the quantitative analysis to the intangible asset in the owner/operator financial statement. Do the numbers add up?  Mathematical errors are more common than anyone cares to admit; check all numerical calculations for accuracy, and make sure […]


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Fraud in the Workplace

Posted in Forensic Accounting, on Jan 2011, By: Mark S. Gottlieb

The popular media have devoted countless hours to storylines that portray fraud in the workplace as an important plot device. From the early TV series Perry Mason and Arrest and Trial to the ubiquitous “ripped from the headlines” stories of the Law and Order franchise, as well as new series on cable such as White Collar, we’ve never lost our fascination for stories that involve fraud and how the perpetrator is finally caught. What compels the senior level manager, the low level employee or the longtime middle manager to ultimately risk everything, convinced that their crimes will go undetected? The characters in  popular fiction, as in the real world, are frequently motivated by financial need caused by avarice, gambling debts, business reversals, poor investments or trying to maintain a lifestyle well beyond their means. Now it seems that almost every day in the business media there are new reports on workplace fraud in all its forms. The frequency of such reports now seem to be outpacing the tv episodes that draw from the “true stories,” and underscoring that truth is stranger than fiction. In a time of massive Ponzi schemes and burgeoning white-collar crime, one can understand why fraud is not uncommon in the business world. In fact, employee fraud costs businesses billions of dollars each year. Employee fraud is an ongoing, widespread and varied problem, one that comes in all sizes for all kinds of companies. It can significantly impact a company’s productivity and profitability. The reasons for fraud […]


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