Business Appraisal For Gift Of Minority Interest

November 2009       Download PDF      Print

Situation

The owner of eSolutions planned to set up a program by which approximately ten percent of his company's shares would be gifted to his children. Because the gift was comprised of more than $10,000 in stock, the owner needed to obtain an independent, third-party appraisal. The IRS requires a business valuation to be performed by a qualified appraiser if the value of a gift of closely-held stock exceeds $10,000.

Engagement

The owner of eSolutions retained Allied Business Group to determine the percentage of ownership in eSolutions that would equal a predetermined dollar amount. This required us to first determine the value of eSolutions as a whole on the date of the gift, and then determine appropriate minority interest discounts to derive the value of a single share of stock in the company. Once we obtained the value for a single share of stock, we backed into the desired gift value, ultimately determining the specific number of shares and partial shares that would be equivalent to the predetermined dollar amount of the gift.

Result

The owner of eSolutions was pleased with the result and engaged Allied multiple times in the following years to provide valuations for additional gifts of stock to his children.