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Certified Public Accountants
(805) 306-7890

Litigation Consulting


Forensic Accounting - Fraud - Business Valuation


May 2010

Feature Article:
"Family Limited Partnerships: Great Facts – and the Taxpayer Still Loses!"

The value of hiring an Arxis Financial valuation expert is often tied to the ability to authoritatively establish and support control and marketability discounts.  Often, this is required in the context of estate and tax planning through family limited partnerships (FLP).  The IRS continues to challenge the advantageous tax attributes of FLP)s when minority interests are gifted to family members.  A knowledgeable valuation expert will be key to successfully presenting and defending FLP valuation and discounts with an eye towards the latest developments such as the Holman case. (click here for complete article)

Practice Profile:
Business Valuation Services for Family Limited Partnerships

A family limited partnership (FLP) can be advantageous for asset protection and estate planning, combining some of the advantages of a corporation with those of a partnership in owning property. FLPs can be a means for the consolidation and protection of family assets for future generations.

In practice, the general partner maintains management control of the business while transferring limited ownership of the business to family members. Limited partnership interests that are gifted to other family members are typically valued at less than fair market value because of lack of marketability and control. So, instead of an outright transfer of business assets to family members, gifting the assets via a limited partnership can save gift and estate taxes. This is where the business valuator plays a significant role. When making a gift or upon the death of one of the partners, the assets in the FLP must be valued.

Since there are inherent restrictions on the ability of limited partners to control the assets and the lack of marketability of a FLP, the valuation of the FLP interest is discounted from the sum of the fair market values of the underlying assets. However, this discount must be quantified and supported. Other IRS and legal issues, such as recent court cases, need to be considered. FLPs can hold an array of assets, including stock in privately-owned businesses, public company stock, and real estate. An appraiser should be adept in valuing this potentially wide array of FLP assets.

Arxis Financial provides valuation expertise to determine the value of a business, the value of an ownership interest, and the change in value over a specified period of time. These valuation services are often performed in the context of commercial and civil litigation. However, there is tremendous value in a business appraisal in estate and gift tax planning and succession planning. Our specialists provide clients with a comprehensible valuation that aids attorneys, business owners, management, and financial planners in decision-making. We also have extensive experience in presenting and defending our findings in the context of litigation.

Our clients benefit from having valuation professionals who understand the realities of market valuations, resulting in very defensible valuations. Arxis Financial's experts are well-known in the industry and highly respected for their depth of knowledge and resources.

Partner Profile:
The Business Valuation practice is headed by partner Chris L. Hamilton, CPA, CFE, CVA, DABFA. Mr. Hamilton is a Certified Public Accountant, Certified Fraud Examiner, Certified Valuation Analyst, and a Diplomate with the American Board of Forensic Accounting. He is a licensed life and disability insurance agent and a General Securities Representative. Mr. Hamilton has published articles in several publications, and has made presentations at national conferences, training institutes and seminars on topics including forensic accounting, fraud and business appraisal.

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Copyright 2010 Arxis Financial. Articles may not be reprinted without permission.

Chris Hamilton Photo
Chris Hamilton, CPA CFE, CVA, DABFA
(805) 306-7890
Chris Hamilton Photo
Litigation Consulting
Forensic Accounting - Fraud - Business Valuation

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