For more than 20 years, Frank, Rimerman has helped clients with fair market value valuations and stock option grants, gift tax valuations, and estate tax valuations. Most of our work is by referral from top estate tax and family planning attorneys.
Under Section 409A of the Internal Revenue Code, any stock option with an exercise price less than the fair market value of the underlying stock determined as of the option grant date constitutes a deferred compensation arrangement that typically will result in taxes, interest and significant penalties.
A company may choose to adopt one of the “presumptive” stock valuation methods set forth in the regulations, thereby putting the burden on the IRS to prove that both (i) the company’s stock option prices are below fair market value, and (ii) the company’s application of the presumptive method was “grossly unreasonable.” One of the presumptive methods is to use a written valuation by an appraiser with knowledge and experience in stock valuation. It should be noted that even a professionally-prepared valuation report will not be considered reasonable if it is more than 12 months old. In addition, significant events occurring even before the 12-month anniversary will require the valuation to be updated.
We are experts in valuing privately-held and venture-backed companies in a wide array of industries and have produced hundreds of reports under 409A.
The area of estate and gift tax valuation can be an ever-changing minefield of laws, regulations, and court decisions. With federal transfer tax rates often in excess of 40 percent, the tax implications of estate planning and gift and estate tax valuations can be significant. The tax implications are magnified by the penalties that can be imposed on taxpayers for undervaluation for gift and estate tax purposes and overvaluation for charitable contribution purposes.
Frank, Rimerman brings solid expertise to your team of estate planning professionals.