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Financial Valuation: Applications and Models, + Website, 3rd Edition by James R. Hitchner

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Chapter 15

Summary of Tax Court Cases Issues

This chapter discusses tax cases that affect business valuations. The discussion focuses on tax cases, since these are more general in application and often contain detailed information on valuations. Civil cases vary by jurisdiction and are very often inconsistent between jurisdictions. Absent are court cases in marital dissolution since they can vary so dramatically from jurisdiction to jurisdiction. Some of these cases are discussed in Chapters 2, 16, 18, 19, and 20 on Standards of Value, Shareholder Disputes, Divorce, Small Businesses, and Professional Practices.

Almost all the cases referenced here are from 1999 to 2009. Although knowledge of older court cases can be important and relevant (see Chapter 9), the cases from the last few years, particularly in the tax area, have dealt with many of the controversial issues faced by analysts today.

In the first two editions of this book, we organized the cases according to major valuation issues; for example, discounts, built-in gains tax, weighted average cost of capital (WACC) and capital asset pricing model (CAPM). These cases convey a strong sense of the direction of the courts. The format for these cases is brief but relevant bullets allow for easy access to important information and the general direction of recent court decisions concerning important valuation topics. However, it is recommended that analysts read the cases to absorb the full context of the issues. Some of the cases ...

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