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The U.S. Treasury Regulations set forth the following definitions of fair market value.

"...The net amount which a willing purchaser...would pay for the interest to a willing seller, neither being under any compulsion to buy or to sell and both having reasonable knowledge of relevant facts." Treas. Regs. §20.2031-3.

Some of the factors which are considered by the IRS are the:
  • History and nature of the business
  • Economic outlook in general, as well as the condition of a particular industry
  • Book value of the stock
  • Company's earning capacity
  • Capacity to pay dividends
  • Good Will of the company
  • Recent sales of company stock
  • Value of similar businesses which are publicly traded.
    Revenue Ruling 59-60,1959-1 C.B. 237

NOTE: Some factors will carry more weight in some valuations than others. No single mathematical formula can be applied. This is a very complex area and one should seek a business valuation specialist.

 

John L. Kingsley is a Investment Adviser Representative of
and Securities and Advisory Services offered through
ING Financial Partners, Inc., Member SIPC
20135 Village 20
Camarillo, CA 93012
Ph (805) 4842514 Fax (805) 484 2539
CA Insurance License Number 0421894
Securities and Investment Advisory Services offered through ING Financial Partners, member SIPC
The John L. Kinglsey Insurance Agency is not a subsidiary of
nor is it controlled by ING Financial Partners, Inc.