Ten Burning Issues within the Appraisal Profession
Many estate planners believe that there exists a set of generally accepted appraisal principles (GAAP) to which all appraisers must adhere.1 Unfortunately, and unbeknownst to those estate planners, the literature and the purported body of knowledge within the appraisal profession are replete with disagreements, some bordering on vehement, on how to treat certain valuation issues. The purpose of this chapter is to highlight ten demonstrated areas of significant disagreement among business appraisers that affect tax valuations as well as the general disciplines of business valuation as a whole.2
Where an appraiser stands on a particular valuation issue will affect a client's appraisal report. When a professional dispute exists on a particular issue, the chances seem to exceed happenstance that the IRS or the opposing appraiser will be on the other side of that issue. Therefore, given the amount of valuation litigation, it is imperative that estate planners, as well as any other stakeholder to a valuation, know where appraisers stand on an issue before that issue is joined. This chapter discusses the following burning issues:
- Discount for lack of marketability
- Applicability of a discount for lack of marketability to a controlling interest
- Validity of discount for imbedded capital gains
- Shift of comparability from the publicly traded arena to the private arena
- Efficient market hypothesis and exceptions (small-firm effect) ...