Cornerstone Research was asked to calculate the fair market value of the assets (including goodwill) of a privately held veterinary pharmaceutical company.
Cornerstone Research was asked to calculate the fair market value of the assets (including goodwill) of a privately held veterinary pharmaceutical company. The company had previously changed its status from a C corporation to an S corporation. When it was later acquired by a C corporation, the acquiring firm became liable for taxes the pharmaceutical company would have owed had it remained a C corporation.
He determined that the increased value was attributable to assets acquired after the S corporation election.
Counsel for the acquiring firm retained Cornerstone Research to value the pharmaceutical firm’s assets at the time it made its S corporation election, five years earlier. George Strong of Cornerstone Research provided an analysis that was used to determine the potentially taxable gain in value between the time of the S corporation election and the time of the company’s acquisition. Mr. Strong filed a report with the U.S. Tax Court, which identified the amount of increased value between the time of the company’s S corporation election and the time of the company’s acquisition. He determined that the increased value was attributable to assets acquired after the S corporation election, thus limiting the amount of taxable liability for the acquirer.
