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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 25

Business Appraisal Reports1

Summary

As noted in Chapter 2, in federal courts, the appraiser may or may not be allowed direct testimony. It is up to the judge to decide whether the appraiser will be allowed to explain or elaborate on the report submitted. In case the appraiser is not allowed direct testimony in court, the report is the direct testimony. Therefore, it is essential that all the supporting data and rationale be included within the covers of the report.

We repeat here a point emphasized in Chapter 3:

The trier of fact can only decide a case based upon the trial record. If evidence does not get into the record because it was not offered or was not admitted because of some objection, the conclusion in one trial may be different from another case where perhaps similar evidence was admitted.

To put forth a simple example, suppose that two valuation cases involving companies in the same industry are being tried at the same time; a good guideline company was presented as part of the evidence in the first case, but not in the second. Even though the guideline company presented in the first case is better than any in the second, it could not be used in the second case. A comprehensive report can thus be outcome determinative.

In this chapter we present two widely accepted standards for business valuation report writing. In addition, the Internal Revenue Service (IRS) Business Valuation Guidelines includes some guidelines on report writing.

The chapter then presents ...

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