With more home-based and small closely-held businesses being started everyday, the likelihood that those concerns become tangled in divorce disputes is growing.  Tax and accounting professionals need to understand the ins and outs of dealing with valuing a closely-held business when a marriage falls apart.  Valuing a business in divorce requires talking a close look at what gain in the value of a business can be attributed to active effort by one of the spouses and what can be attributed to market forces, inflation and other "passive" factors. 

Two articles from the latest issue of CCH's Business Valuation Alert analyze this area.  In the first article, experts Ashok B. Abbott and Timothy C. Voit take a close look at the various considerations in making value considerations, while in the second article noted valuation consultant, George B. Hawkins, takes apart a few myths regarding the effect of inflation on business values.

Read the full copy of the Abbot and Voit Article and the George B. Hawkins article to learn more about how to dig beneath the surface of valuation and come up with rock solid answers on business values in divorce situations.

Order the Business Valuation Alert

While IRS disputes bring a high level of focus, headache and potential risk, state tax ramifications and complexities spilling out of IRS actions, unfortunately, often get overlooked.  Tax attorney Robert S. Schriebman points out that California, for example, has three separate agencies dedicated to taxation issues — the Franchise Tax Board, the State Board of Equalization and the Employment Development Department.  All of them have auditors, all of them share information with each other (and the IRS), and all of them can bring grief to unwary taxpayers and advisors who focus solely on IRS disputes while leaving their state tax flank unprotected.  Schriebman points out several areas to watch and provides advice on how practitioners can keep a wary eye out for state tax controversies in the midst of IRS disputes.

• U.S. Master State Tax Practice and Procedure Guide (Third Edition)
• Federal Taxation Practice and Procedure (Seventh Edition)
• Tax Practice and Procedure Commentaries on CCH Tax Research Network

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Passthrough entities are a popular choice for smaller businesses and those who want to "keep it simple."  But tax planning for these entities can be far from simple, as Stephen L. Owen points out in a recent issue of the Journal of Passthrough Entities.  For example, built-in gain is handled radically differently when an S corp is involved rather than a partnership or LLC.  S corporations don't have the special allocations of tax items, such as built-in gain that must be considered when planning for an LLC or partnership. Owens, a partner in the Baltimore and Washington, D.C., offices of Piper Rudnick LLP, walks through several examples and shows the potential landmines and opportunities to be considered when dealing with passthrough entity choices.

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Now that tax season has wrapped up, it might be time to look back at your clients' data to see what additional services they may need.  For clients whose returns reflected significant net worth, the time could be right to put together an asset protection plan.  After doing a net worth assessment with your client, it will be time to look at options such as insurance, trusts, limited family partnerships and other asset protection plans that could help shield your clients from losing everything they've worked for in a lawsuit. 

In a new CCH ClientRelate engagement planner, you can walk through these options and the questions you'll need to ask clients to help them effectively choose the right options.  Then, working with the clients' attorney, you can give them the peace of mind they want and need, while providing even better service than they expected.  CCH's editors have prepared a helpful document that provides background and analysis on asset protection planning as part of a new engagement service for ClientRelate.  In addition to the Service Analysis document, ClientRelate provides a service summary, client letters and practice aids.  

Read the Asset Protection Planning Service Analysis document from CCH ClientRelate.

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Access last month's issue of Focus on Tax, including Cut the high cost of high-speed workdays.