17 5 2016 1 Federal Case Law Update
Federal Case Law Update
Consultants’ Training Institute
Federal and State Case Law Update
2016 National Association of Certified Valuators ®). All rights © 2016 National Association of©Certified Valuators and Analysts™ (NACVA reserved.and
Analysts™ (NACVA®). All rights reserved. 1
Case Law Overview • • • • •
Context / Procedure / Facts Issues Rules Analysis (facts & circumstances) Conclusion
Remember: I.R.A.C.
Federal and State Case Law Update © 2016 National Association of Certified Valuators and Analysts™ (NACVA ®). All rights reserved. 2
Section 2036 Cases • • •
Section 2036 includes inter vivos transfers in a decedent's gross estate that were testamentary in nature. Does not apply in cases where the transfer was a bona fide sale for adequate and full consideration. Three conditions must be met: 1. Decedent made an inter vivos transfer of property;(litigants generally agree that this condition is met, and the following two become issues at trial) 2. Decedent retained an interest or right in the transferred property, which the decedent did not relinquish before her death; and 3. Decedent's transfer was not a bona fide sale for adequate and full consideration.
Federal and State Case Law Update © 2016 National Association of Certified Valuators and Analysts™ (NACVA ®). All rights reserved. 3
Estate of Purdue v. C.I.R. • T.C. Memo. 2015-249 (2015) Issues: – Whether the decedent's transfer was a bona fide sale for adequate and full consideration. • Yes. The value of transferred property was excluded from the gross estate under Section 2036. – Whether decedent's gifts of PFLLC interests from 2001 through 2007 to the Purdue Family Trust are present interest gifts which qualify for exclusion under section 2503(b). • Yes. The gifts were eligible for annual gift-tax exclusion. • Factors to be considered when deciding whether a nontax reason existed: 1. The taxpayer's standing on both sides of the transaction; 2. The taxpayer's financial dependence on distributions from the partnership; 3. The taxpayer's commingling of partnership funds with the taxpayer's own; 4. The taxpayer's actual failure to transfer the property to the partnership; 5. Discounting the value of the partnership interests relative to the value of the property contributed; and 6. The taxpayer's old age or poor health when the partnership was formed. Federal and State Case Law Update © 2016 National Association of Certified Valuators and Analysts™ (NACVA ®). All rights reserved. 4
Estate of Purdue v. C.I.R. •
A nontax purpose existed in forming the FLLC: to consolidate investments into a family asset managed by a single adviser. –
–
•
Gifts were present interest gifts of right to income and qualified for the annual exclusion because they satisfied 3 prong test: 1. 2. 3.
•
Before transfer: marketable securities were maintained across five different brokerage accounts at three management firms, and Mr. Purdue handled all of the financial decisions regarding the marketable securities. After transfer: consolidated into a single overall, well-coordinated professional investment strategy applied to all of the investments, and the Purdue children made the investment decisions jointly.
The LLC would generate income; Some portion of the income would flow steadily to the donees; and That portion of the income would be readily ascertained. • The donees received income from those interests to satisfy the present interest requirement.
Bona fide sale occurred because: – – – –
Decedent and Mr. Purdue were not financially dependent on distributions; No commingling of decedent's funds other than a minimal dollar amount across three deposits; LLC formalities were respected; and Decedent and Mr. Purdue were in good health at the time the transfer was made.
Federal and State Case Law Update © 2016 National Association of Certified Valuators and Analysts™ (NACVA ®). All rights reserved. 5
Estate of Holliday v. C.I.R. • T.C. Memo. 2016-51 (2016) Issues: • Whether the decedent retained possession or enjoyment of transferred property. – Yes. The Court found an implied agreement. – Limited partnership agreement unconditionally provides that decedent was entitled to receive distributions in certain circumstances. – There had not been a distribution, but had decedent required a distribution, one would have been made. – Whether the decedent's transfer was a bona fide sale for adequate and full consideration. • No. Taxpayer lacked legitimate nontax reason for creating LP, and thus her inter vivos transfer of property to LP was not bona fide sale.
Federal and State Case Law Update © 2016 National Association of Certified Valuators and Analysts™ (NACVA ®). All rights reserved. 6
Estate of Holliday v. C.I.R. Arguments that the trust was formed for legitimate nontax purposes: 1. Protection From Trial Attorney Extortion – A theoretical justification since decedent had never been sued. – Decedent continued to hold significant assets that were not transferred to the LP. 2. Undue Influence of Caregivers – Transfer of assets to LP was not motivated by decedent’s own concern, and this reason was not discussed with decedent. – Caregivers stole from the family, but theft is distinct from undue influence, and simply changing the titleholder of assets will not necessarily protect them from theft. – Decedent's cousin-in-law experienced instances of extortion and theft, but the decedent’s was not similarly situated. 3. Preservation of Assets – Beneficiary’s assets were held in trusts and there were no issues with the management of these assets. – Decedent was not involved in selecting the structure used to preserve her assets. 4. Additional Factors Indicating the Transfer Was Not a Bona Fide Sale – Decedent stood on both sides of the transaction. There was no meaningful negotiation or bargaining associated with the formation of the partnership. – Various formalities were not kept. LP required a separate document to compensate for managing the affairs, but there was no separate document. LP failed to maintain books and records other than brokerage statements and ledgers. Partners did not hold formal meetings, and no minutes were kept. – LP held marketable securities that were not actively managed and were traded only on limited occasions. Federal and State Case Law Update © 2016 National Association of Certified Valuators and Analysts™ (NACVA ®). All rights reserved. 7
Estate of Stone v. C.I.R. • T.C. Memo. 2012-48 (2012) •
•
•
•
Decedent's Transfer of Woodland Parcels to Stone Family Limited Partnership fell within exception to Section 2036(a) because they satisfied the bona fide sale component and full and adequate consideration component . Two nontax motives for transferring the woodland parcels to SFLP: – To create a family asset which later may be developed and sold by the family; and – To protect the woodland parcels from division as a result of partition actions. – A desire by a decedent to have assets jointly managed by family members, even standing alone, is a sufficient nontax motive for purposes of section 2036(a). Partners of SFLP failed to respect some partnership formalities, but – Decedent did not depend on distributions from SFLP as no distributions were ever made, – No commingling of partners' personal and partnership funds, as SFLP had no partnership funds, – No discounting of SFLP interests for gift tax purposes occurred, and – Decedent was in good health at the time the transfer. Takeaway: Courts may forgive some disrespect of formalities, but always advise clients to respect them so it does not become an issue with the IRS or in litigation.
Federal and State Case Law Update © 2016 National Association of Certified Valuators and Analysts™ (NACVA ®). All rights reserved. 8
Pilgrim's Pride Corp. v. C.I.R. • 5th Circuit, 779 F.3d 311 (2015) • • •
Issue: Whether Pilgrim's Pride Corporation's loss from its abandonment of securities is an ordinary loss or a capital loss. Holding: Abandonment of securities was an ordinary loss, not a capital loss. A capital loss is a loss from the “sale or exchange” of a capital asset. – Exception: 26 U.S.C. § 1234A(1) requires losses to be treated as if they were sales or exchanges if the loss was attributable to the cancellation, lapse, expiration, or other termination of a right or obligation of a capital asset in the hands of the taxpayer. • § 1234A(1) only applies to the termination of contractual or derivative rights and does not apply to abandonment of capital assets. – Exception: 26 U.S.C. § 165(g) requires losses be treated as a loss from the sale or exchange of a capital asset if any security which is a capital asset becomes worthless during the taxable year. • Property cannot be treated as worthless for tax loss purposes if it, objectively, has substantial value. • The parties stipulated that the Securities were worth at least $20 million at the time of their abandonment. Thus, the Securities were not objectively worthless.
Federal and State Case Law Update © 2016 National Association of Certified Valuators and Analysts™ (NACVA ®). All rights reserved. 9
Estate of Morrissette v. C.I.R. • 146 T.C. No. 11, 2016 WL 1535204 •
Issue: Whether, for valuation purposes, the split-dollar life insurance arrangements at issue are governed by the economic benefit regime or the loan regime. – Key question: whether the lump-sum payment of premiums made on the policies indirectly by the CMM Trust generated any additional economic benefit other than current life insurance protection. – Loan regime applies if any additional economic benefit is conferred on the donee other than current life insurance protection. – Economic benefit regime applies if there is no additional economic benefit.
•
Holding: Because the only economic benefit conferred upon the trusts was current life insurance protection, the economic benefit regime applies.
Federal and State Case Law Update © 2016 National Association of Certified Valuators and Analysts™ (NACVA ®). All rights reserved. 10
Estate of Morrissette v. C.I.R. • 146 T.C. No. 11, 2016 WL 1535204 •
Trusts had no current or future right to any portion of the policy cash value during the lifetime of the grantor since – –
•
•
It was a revocable trust in which the donor retained an absolute right to alter the trust throughout her lifetime, and The donor retained the right to receipt of the receivables with no requirement to distribute the receivables to the Dynasty Trusts.
Policy was not a reverse split-dollar life insurance arrangement because the receivables the CMM Trust obtained in exchange for its advances provided the CMM Trust sole access to the CSV of the policies. “Prepaid premiums” were not a benefit other than current life insurance protection because the Dynasty Trusts were not required to pay any premiums; the CMM Trust was already obligated to pay all the premiums.
Federal and State Case Law Update © 2016 National Association of Certified Valuators and Analysts™ (NACVA ®). All rights reserved. 11
Estate of Dieringer v. C.I.R. • 146 T.C. No. 8, 2016 WL 1268292 Issues: • Whether the charitable contribution deduction is equal to the date-of-death fair market value of stock. – No. Numerous events occurred after D's death that changed the nature and reduced the value of the property that was actually transferred to the foundation. • Whether the estate is liable for a section 6662(a) accuracy-related penalty due to negligence or a disregard of rules or regulations. – Yes. Estate failed to inform the appraiser that the redemption was for a majority interest, and also instructed the appraiser to value the redeemed stock as a minority interest. • Date-of-death appraisal (April 14, 2009) valued voting stock at $1,824 per share and nonvoting stock at $1,733 per share but did not include any discounts for lack of control or marketability.
Federal and State Case Law Update © 2016 National Association of Certified Valuators and Analysts™ (NACVA ®). All rights reserved. 12
Estate of Dieringer v. C.I.R. • 146 T.C. No. 8, 2016 WL 1268292 •
• •
For purposes of the redemption appraisal (November 30, 2009), stock was valued at $916 per voting share and $870 per nonvoting share with specific instructions to value stock as a minority interest. – Valuation of the voting stock included a 15% discount for lack of control and a 35% discount for lack of marketability plus an additional 5% discount for the lack of voting power . – Evidence does not support a significant decline in the economy that resulted in a large decrease in value in only seven months. – Decline was due to the specific instruction to value decedent's majority interest as a minority interest with a 50% discount. Result: The trust did not transfer decedent's bequeathed shares nor the value of the bequeathed shares to the foundation. Intrafamily transactions in a closely corporation had no independent and outside accountability.
Federal and State Case Law Update © 2016 National Association of Certified Valuators and Analysts™ (NACVA ®). All rights reserved. 13
Tri County Wholesale Distributors, Inc. v. Labatt USA Operating Co., LLC
• 112 F.Supp.3d 639 (2015)
The Court held a diminished value hearing for termination of distribution franchises of certain brands of beer. • Diminished value calculated with DCF analysis, plus any other loss in fair market value to other tangible or intangible components of the distributorships directly resulting from loss of the Brands. Issues: • Which DCF analysis to adopt. –
•
Whether to accept the use of gross multiples—a market method—as an alternative valuation method. –
•
Court applied beer manufacturer's DCF methodology because expert was more credible.
No. Expert’s analysis yielded brand values that were inappropriately low for general market conditions (multiples range from 2 to 5 times gross profits for all beer brands, but expert’s DCF analysis was equivalent only to 1.21-2.1 times gross profits).
Whether to deduct profits earned after the termination date. –
No. The statute does not call for a deduction of profits earned, the projected revenue is not included in the diminished value figure, and both parties have benefitted financially from the status quo.
Federal and State Case Law Update © 2016 National Association of Certified Valuators and Analysts™ (NACVA ®). All rights reserved. 14
Tri County: Expert’s Credibility •
•
•
•
Credibility determinations are guided, largely, by the competing experts' rebuttal analyses of the other experts' assumptions. Plaintiff’s expert: Lamont Seckman – Background: involved in the beer industry since 1991, first as an employee and later as a principal within a consulting firm that works mostly with beer and beverage distributors across the country – Failed to explain his calculations and charts. – Used a number of end-of-year dates as the valuation date that were not directly applicable to the case. Defendant’s expert: Dr. Samuel Kursh – Education and background: doctorate in business administration and taught “commercial damages” as a faculty member at a law school. – Reduced models to their component parts. – Prior courts already have accepted his DCF analyses as applied to the NAB Brands. – Used the proper valuation date in his DCF model (date of the termination notice). Conclusion: Kursh's appraisal was “more credible and persuasive” than the testimony offered by Seckman.
Federal and State Case Law Update © 2016 National Association of Certified Valuators and Analysts™ (NACVA ®). All rights reserved. 15
Consultants’ Training Institute
Federal and State Case Law Update
2016 National Association of Certified Valuators ®). All rights © 2016 National Association of©Certified Valuators and Analysts™ (NACVA reserved.and
Analysts™ (NACVA®). All rights reserved. 1
Case Law Overview • • • • •
Context / Procedure / Facts Issues Rules Analysis (facts & circumstances) Conclusion
Remember: I.R.A.C.
Federal and State Case Law Update © 2016 National Association of Certified Valuators and Analysts™ (NACVA ®). All rights reserved. 2
Section 2036 Cases • • •
Section 2036 includes inter vivos transfers in a decedent's gross estate that were testamentary in nature. Does not apply in cases where the transfer was a bona fide sale for adequate and full consideration. Three conditions must be met: 1. Decedent made an inter vivos transfer of property;(litigants generally agree that this condition is met, and the following two become issues at trial) 2. Decedent retained an interest or right in the transferred property, which the decedent did not relinquish before her death; and 3. Decedent's transfer was not a bona fide sale for adequate and full consideration.
Federal and State Case Law Update © 2016 National Association of Certified Valuators and Analysts™ (NACVA ®). All rights reserved. 3
Estate of Purdue v. C.I.R. • T.C. Memo. 2015-249 (2015) Issues: – Whether the decedent's transfer was a bona fide sale for adequate and full consideration. • Yes. The value of transferred property was excluded from the gross estate under Section 2036. – Whether decedent's gifts of PFLLC interests from 2001 through 2007 to the Purdue Family Trust are present interest gifts which qualify for exclusion under section 2503(b). • Yes. The gifts were eligible for annual gift-tax exclusion. • Factors to be considered when deciding whether a nontax reason existed: 1. The taxpayer's standing on both sides of the transaction; 2. The taxpayer's financial dependence on distributions from the partnership; 3. The taxpayer's commingling of partnership funds with the taxpayer's own; 4. The taxpayer's actual failure to transfer the property to the partnership; 5. Discounting the value of the partnership interests relative to the value of the property contributed; and 6. The taxpayer's old age or poor health when the partnership was formed. Federal and State Case Law Update © 2016 National Association of Certified Valuators and Analysts™ (NACVA ®). All rights reserved. 4
Estate of Purdue v. C.I.R. •
A nontax purpose existed in forming the FLLC: to consolidate investments into a family asset managed by a single adviser. –
–
•
Gifts were present interest gifts of right to income and qualified for the annual exclusion because they satisfied 3 prong test: 1. 2. 3.
•
Before transfer: marketable securities were maintained across five different brokerage accounts at three management firms, and Mr. Purdue handled all of the financial decisions regarding the marketable securities. After transfer: consolidated into a single overall, well-coordinated professional investment strategy applied to all of the investments, and the Purdue children made the investment decisions jointly.
The LLC would generate income; Some portion of the income would flow steadily to the donees; and That portion of the income would be readily ascertained. • The donees received income from those interests to satisfy the present interest requirement.
Bona fide sale occurred because: – – – –
Decedent and Mr. Purdue were not financially dependent on distributions; No commingling of decedent's funds other than a minimal dollar amount across three deposits; LLC formalities were respected; and Decedent and Mr. Purdue were in good health at the time the transfer was made.
Federal and State Case Law Update © 2016 National Association of Certified Valuators and Analysts™ (NACVA ®). All rights reserved. 5
Estate of Holliday v. C.I.R. • T.C. Memo. 2016-51 (2016) Issues: • Whether the decedent retained possession or enjoyment of transferred property. – Yes. The Court found an implied agreement. – Limited partnership agreement unconditionally provides that decedent was entitled to receive distributions in certain circumstances. – There had not been a distribution, but had decedent required a distribution, one would have been made. – Whether the decedent's transfer was a bona fide sale for adequate and full consideration. • No. Taxpayer lacked legitimate nontax reason for creating LP, and thus her inter vivos transfer of property to LP was not bona fide sale.
Federal and State Case Law Update © 2016 National Association of Certified Valuators and Analysts™ (NACVA ®). All rights reserved. 6
Estate of Holliday v. C.I.R. Arguments that the trust was formed for legitimate nontax purposes: 1. Protection From Trial Attorney Extortion – A theoretical justification since decedent had never been sued. – Decedent continued to hold significant assets that were not transferred to the LP. 2. Undue Influence of Caregivers – Transfer of assets to LP was not motivated by decedent’s own concern, and this reason was not discussed with decedent. – Caregivers stole from the family, but theft is distinct from undue influence, and simply changing the titleholder of assets will not necessarily protect them from theft. – Decedent's cousin-in-law experienced instances of extortion and theft, but the decedent’s was not similarly situated. 3. Preservation of Assets – Beneficiary’s assets were held in trusts and there were no issues with the management of these assets. – Decedent was not involved in selecting the structure used to preserve her assets. 4. Additional Factors Indicating the Transfer Was Not a Bona Fide Sale – Decedent stood on both sides of the transaction. There was no meaningful negotiation or bargaining associated with the formation of the partnership. – Various formalities were not kept. LP required a separate document to compensate for managing the affairs, but there was no separate document. LP failed to maintain books and records other than brokerage statements and ledgers. Partners did not hold formal meetings, and no minutes were kept. – LP held marketable securities that were not actively managed and were traded only on limited occasions. Federal and State Case Law Update © 2016 National Association of Certified Valuators and Analysts™ (NACVA ®). All rights reserved. 7
Estate of Stone v. C.I.R. • T.C. Memo. 2012-48 (2012) •
•
•
•
Decedent's Transfer of Woodland Parcels to Stone Family Limited Partnership fell within exception to Section 2036(a) because they satisfied the bona fide sale component and full and adequate consideration component . Two nontax motives for transferring the woodland parcels to SFLP: – To create a family asset which later may be developed and sold by the family; and – To protect the woodland parcels from division as a result of partition actions. – A desire by a decedent to have assets jointly managed by family members, even standing alone, is a sufficient nontax motive for purposes of section 2036(a). Partners of SFLP failed to respect some partnership formalities, but – Decedent did not depend on distributions from SFLP as no distributions were ever made, – No commingling of partners' personal and partnership funds, as SFLP had no partnership funds, – No discounting of SFLP interests for gift tax purposes occurred, and – Decedent was in good health at the time the transfer. Takeaway: Courts may forgive some disrespect of formalities, but always advise clients to respect them so it does not become an issue with the IRS or in litigation.
Federal and State Case Law Update © 2016 National Association of Certified Valuators and Analysts™ (NACVA ®). All rights reserved. 8
Pilgrim's Pride Corp. v. C.I.R. • 5th Circuit, 779 F.3d 311 (2015) • • •
Issue: Whether Pilgrim's Pride Corporation's loss from its abandonment of securities is an ordinary loss or a capital loss. Holding: Abandonment of securities was an ordinary loss, not a capital loss. A capital loss is a loss from the “sale or exchange” of a capital asset. – Exception: 26 U.S.C. § 1234A(1) requires losses to be treated as if they were sales or exchanges if the loss was attributable to the cancellation, lapse, expiration, or other termination of a right or obligation of a capital asset in the hands of the taxpayer. • § 1234A(1) only applies to the termination of contractual or derivative rights and does not apply to abandonment of capital assets. – Exception: 26 U.S.C. § 165(g) requires losses be treated as a loss from the sale or exchange of a capital asset if any security which is a capital asset becomes worthless during the taxable year. • Property cannot be treated as worthless for tax loss purposes if it, objectively, has substantial value. • The parties stipulated that the Securities were worth at least $20 million at the time of their abandonment. Thus, the Securities were not objectively worthless.
Federal and State Case Law Update © 2016 National Association of Certified Valuators and Analysts™ (NACVA ®). All rights reserved. 9
Estate of Morrissette v. C.I.R. • 146 T.C. No. 11, 2016 WL 1535204 •
Issue: Whether, for valuation purposes, the split-dollar life insurance arrangements at issue are governed by the economic benefit regime or the loan regime. – Key question: whether the lump-sum payment of premiums made on the policies indirectly by the CMM Trust generated any additional economic benefit other than current life insurance protection. – Loan regime applies if any additional economic benefit is conferred on the donee other than current life insurance protection. – Economic benefit regime applies if there is no additional economic benefit.
•
Holding: Because the only economic benefit conferred upon the trusts was current life insurance protection, the economic benefit regime applies.
Federal and State Case Law Update © 2016 National Association of Certified Valuators and Analysts™ (NACVA ®). All rights reserved. 10
Estate of Morrissette v. C.I.R. • 146 T.C. No. 11, 2016 WL 1535204 •
Trusts had no current or future right to any portion of the policy cash value during the lifetime of the grantor since – –
•
•
It was a revocable trust in which the donor retained an absolute right to alter the trust throughout her lifetime, and The donor retained the right to receipt of the receivables with no requirement to distribute the receivables to the Dynasty Trusts.
Policy was not a reverse split-dollar life insurance arrangement because the receivables the CMM Trust obtained in exchange for its advances provided the CMM Trust sole access to the CSV of the policies. “Prepaid premiums” were not a benefit other than current life insurance protection because the Dynasty Trusts were not required to pay any premiums; the CMM Trust was already obligated to pay all the premiums.
Federal and State Case Law Update © 2016 National Association of Certified Valuators and Analysts™ (NACVA ®). All rights reserved. 11
Estate of Dieringer v. C.I.R. • 146 T.C. No. 8, 2016 WL 1268292 Issues: • Whether the charitable contribution deduction is equal to the date-of-death fair market value of stock. – No. Numerous events occurred after D's death that changed the nature and reduced the value of the property that was actually transferred to the foundation. • Whether the estate is liable for a section 6662(a) accuracy-related penalty due to negligence or a disregard of rules or regulations. – Yes. Estate failed to inform the appraiser that the redemption was for a majority interest, and also instructed the appraiser to value the redeemed stock as a minority interest. • Date-of-death appraisal (April 14, 2009) valued voting stock at $1,824 per share and nonvoting stock at $1,733 per share but did not include any discounts for lack of control or marketability.
Federal and State Case Law Update © 2016 National Association of Certified Valuators and Analysts™ (NACVA ®). All rights reserved. 12
Estate of Dieringer v. C.I.R. • 146 T.C. No. 8, 2016 WL 1268292 •
• •
For purposes of the redemption appraisal (November 30, 2009), stock was valued at $916 per voting share and $870 per nonvoting share with specific instructions to value stock as a minority interest. – Valuation of the voting stock included a 15% discount for lack of control and a 35% discount for lack of marketability plus an additional 5% discount for the lack of voting power . – Evidence does not support a significant decline in the economy that resulted in a large decrease in value in only seven months. – Decline was due to the specific instruction to value decedent's majority interest as a minority interest with a 50% discount. Result: The trust did not transfer decedent's bequeathed shares nor the value of the bequeathed shares to the foundation. Intrafamily transactions in a closely corporation had no independent and outside accountability.
Federal and State Case Law Update © 2016 National Association of Certified Valuators and Analysts™ (NACVA ®). All rights reserved. 13
Tri County Wholesale Distributors, Inc. v. Labatt USA Operating Co., LLC
• 112 F.Supp.3d 639 (2015)
The Court held a diminished value hearing for termination of distribution franchises of certain brands of beer. • Diminished value calculated with DCF analysis, plus any other loss in fair market value to other tangible or intangible components of the distributorships directly resulting from loss of the Brands. Issues: • Which DCF analysis to adopt. –
•
Whether to accept the use of gross multiples—a market method—as an alternative valuation method. –
•
Court applied beer manufacturer's DCF methodology because expert was more credible.
No. Expert’s analysis yielded brand values that were inappropriately low for general market conditions (multiples range from 2 to 5 times gross profits for all beer brands, but expert’s DCF analysis was equivalent only to 1.21-2.1 times gross profits).
Whether to deduct profits earned after the termination date. –
No. The statute does not call for a deduction of profits earned, the projected revenue is not included in the diminished value figure, and both parties have benefitted financially from the status quo.
Federal and State Case Law Update © 2016 National Association of Certified Valuators and Analysts™ (NACVA ®). All rights reserved. 14
Tri County: Expert’s Credibility •
•
•
•
Credibility determinations are guided, largely, by the competing experts' rebuttal analyses of the other experts' assumptions. Plaintiff’s expert: Lamont Seckman – Background: involved in the beer industry since 1991, first as an employee and later as a principal within a consulting firm that works mostly with beer and beverage distributors across the country – Failed to explain his calculations and charts. – Used a number of end-of-year dates as the valuation date that were not directly applicable to the case. Defendant’s expert: Dr. Samuel Kursh – Education and background: doctorate in business administration and taught “commercial damages” as a faculty member at a law school. – Reduced models to their component parts. – Prior courts already have accepted his DCF analyses as applied to the NAB Brands. – Used the proper valuation date in his DCF model (date of the termination notice). Conclusion: Kursh's appraisal was “more credible and persuasive” than the testimony offered by Seckman.
Federal and State Case Law Update © 2016 National Association of Certified Valuators and Analysts™ (NACVA ®). All rights reserved. 15
