TAX CORNER
Irv Blackman and Brian Whitlock are CPAs with Blackman Kallick Bartelstein, LLP in Chicago. Also lawyers, they specialize in business succession and wealth transfer and are sought-after speakers. Want to consult? Need a second opinion?...Call Irv or Brian, 312-207-1040. LET'S KILL SOME BUSINESS VALUATION MYTHS The typical TV game shows only allow about 10 seconds for the contestant to give the right answer. Okay, try this quick quiz. What is the most valuable asset you own? Hands down, almost every business owner answers, "My business." Good! Next question. What's your business worth? Silence! Yes, hands down, the most common answer is no answer -- given 10 seconds or 10 months. So what happens in real life when those same business owners or their families must value the business? Hey, things happen. Things like gifts of the family business stock to the kids; death, requiring valuation for estate tax purposes; or divorce, where valuation becomes an expensive tax battle. Or, how about buying or selling a business? The wrong valuation can rob you of hard-earned dollars. It can even cause your business to be sold to pay taxes. There are three business valuation myths that I hear from business owners and their families when I consult with them. First, the business is worth book value (usually this value is too low); second, the value is eight to ten times after-tax earnings (usually this value is too high); and third, an S corporation is worth more than a C corporation (a corporation that pays income tax) because the S corporation doesn't pay federal income tax. (This is just plain wrong...there's no difference in value). Well, think about this: There are two piles of stock in front of you. One pile is made up of the likes of IBM, Microsoft and AT&T, with a total value of $2 million. The second pile is the stock of Your Family Co., also worth $2 million dollars, valued by the "right" (even the IRS would agree) valuation method. Think for a minute. Which pile is worth more? Right, the first pile. Just call your broker and you can have $2 million in your hands, less the broker's commission, in a few days. What about the value of the second pile -- Your Family Co. stock? Well, the fact is that the courts give you a discount for general lack of marketability of about 35 percent, or about $700,000. That discount will save your estate about $350,000 in taxes. What's the lesson to be learned? If your business is one of your most valuable assets, get a professional valuation of it done NOW! Why? It is a necessary step in every tax plan that allows you to transfer your wealth to your family free of all estate taxes. Join the tax-savings fun. Send for these Special reports: (1) How to VALUE YOUR BUSINESS; (2) How You Can BEAT THE ESTATE TAX...Legally; and (3) PAY ZERO ESTATE TAX...The Super Trust Way ($27 each, $45 for any two, $59 for all three) to Book Division, Blackman Kallick Bartelstein, LLP, 300 South Riverside Plaza, Chicago, Illinois 60606.