Effect of the Tax Cuts and Jobs Act on Valuations

07-Feb-2018

The wide-reaching provisions of the Tax Cuts and Jobs Act (TCJA) will significantly affect values of businesses and assets.  Small business owners and investors in closely-held businesses need to consider carefully whether existing values obtained are reasonable going forward.  


Much of the data upon which valuators rely are net of income taxes.  Valuators will apply discount and capitalization rates to streams of cash flows (or other benefits) using factors that are derived from after-tax earnings of publicly-held corporations.  In addition, when valuing a pass-through entity, such as an S Corporation or partnership, valuators estimate the investor level income taxes.  Finally, assets with significant unrealized gains are generally discounted for taxes on capital gains.  All of these inputs are affected to one degree or another by the provisions of TCJA.  


Cash flow forms the basis for valuation of businesses and assets.  TCJA will alter these cash flows in the immediate future and beyond to varying degrees.  The impact on values can be significant and the determination of the impact can be a complex process.  A prudent investor will consider whether his/her valuation needs to be updated before moving forward on a transaction.  Proceed with caution; and, if necessary, consult a qualified valuation expert.

Charles P. Rafferty, CPA, CFE, CVA, ABV, CFF is a member with GranthamPoole PLLC and a recognized leader in the fields of business valuation, litigation services, and forensic accounting.  He has written, taught, and spoken extensively on these topics locally and nationally.  He has served on the Ethics Oversight Board of the National Association of Certified Valuators and Analysts (NACVA), as president of the Mississippi Chapter of NACVA, and as Chairman of the Business Valuation Committee of Mississippi Society of Certified Public Accountants.  Please contact Charley at crafferty@granthampoole.com, www.linkedin.com/in/charley-rafferty, or 601-499-2400. CPA License # R2608


***The above does not represent tax advice.  Each situation is fact-dependent, and you should seek the advice of a competent advisor. GranthamPoole PLLC is a provider of tax, accounting, advisory and strategic services, partnering with clients across a broad spectrum of industries and sizes. 




QuickBooks Certified ProAdvisor - QuickBooks Online Certification

Jackson Metro:

1062 Highland Colony Parkway
Suite 201 Ridgeland, MS 39157
Phone: 601-499-2400
Fax: 601-499-2401

Oxford:

1200 Jefferson Avenue, Suite 206
Oxford, MS 38655
Phone: 662-234-8130
Fax: 662-234-8892

News

07-May-2018

IRS Shares Resources for Small Business Owners

Last week, the IRS highlighted resources for small business owners and the self-employed in honor of National Small Business Week. A few of the sh.. Read More

27-Mar-2018

Tax Planning Opportunities – Renovations of Commercial Real Estate

In our earlier installment about How Tax Reform Affects Owners of Commercial Real Estate (http://www.granthampoole.com/announcements/how-tax-refor.. Read More

14-Mar-2018

Alimony and the New Tax Act

The Tax Cuts and Jobs Act (the Act) ushered in significant tax reforms for both individuals and businesses with its passage last December. Most o.. Read More

07-Mar-2018

Regulations Soon Issued for Carried Interest Limitations

The IRS announced it will be releasing regulations clarifying limitations around carried interests in S corporations in light of the new tax law. .. Read More

05-Mar-2018

Interest on Home Equity Loans

The IRS recently advised taxpayers that in many cases, the interest paid on their home equity loans is still deductible under the new tax law. For.. Read More

26-Feb-2018

529 Plans After Tax Reform – Better Than Before

Qualified tuition plans, also known as “529 plans” in reference to the applicable Internal Revenue Code Section, have been around for .. Read More

19-Feb-2018

GranthamPoole PLLC Tax Reform Seminar

Listen in as our experts discuss some of the important changes in the tax code at our recent Tax Reform Seminar. The seminar covers changes such as in.. Read More

07-Feb-2018

Effect of the Tax Cuts and Jobs Act on Valuations

The wide-reaching provisions of the Tax Cuts and Jobs Act (TCJA) will significantly affect values of businesses and assets. Small business owners.. Read More

25-Jan-2018

Tax Reform Limits State and Local Tax Deduction

One of the areas affected by the Tax Cuts and Jobs Act (TCJA) is individual itemized deductions. This article will address one specific itemized .. Read More

16-Jan-2018

Estate Planning Considerations as a Result of Tax Reform

The Tax Cuts and Jobs Act of 2017 (TCJA) reduces individual and corporate income tax rates, removes a multitude of credits and deductions, enhance.. Read More

View All News...

Want us to stay in touch?

* Required
Captcha Image


Copyright © 2014-2017 GranthamPoole PLLC
MS Firm Permit Number F0338