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Business Valuation and Federal Taxes: Procedure, Law and Perspective, 2nd Edition by Shannon P. Pratt, David Laro

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Chapter 3

Business Valuation Experts

Summary

This chapter covers the use of business valuation experts in valuation controversies. To qualify under the Federal Rules of Evidence (FRE) as an “expert” in business valuation, the appraiser must have sufficient training or experience. Preferably, the expert also will be certified by one of the relevant accrediting bodies. See the appendix at the end of this chapter for a detailed discussion of expert certifications. Certification recognizes that the expert, whose job it is to render an opinion on valuation issues, is qualified to do so.

Before trial, the expert will compile all of the information she needs, review it, and render a written opinion as to value. This opinion will then be presented to the trier of fact.

There are four conditions for the effective use of experts:

1. The expert must be qualified to perform the necessary analysis and formulate the required expert opinion. Appraisers are specialists, and it is important to select the right one for the job. An accredited appraiser is almost inevitably more qualified than one who is not.

2. The expert must have credibility with the court. Credibility means that the expert is worthy of belief. One way to ascertain the credibility of the expert is by researching prior cases where he or she has testified. Courts often comment on the qualifications and reliability of the expert, providing a trove of information on the consistency and thoroughness of that expert.

3. The expert should ...

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