Page 266 - DCOM205_ACCOUNTING_FOR_COMPANIES_II

Unit 12: Valuation of Shares

4. When the shares of a private company are sold or purchased. Notes

5. When the shares of such a company which is not listed on the stock exchange, are sold or
purchased.

6. At the time of reconstruction of the company, if there are some dissentient members, to
acquire the shares of such members, valuation of shares takes place.
7. For the purpose of capital gain tax, gift tax, wealth tax and court fees.

8. When compensation is paid by the government upon the nationalisation of the company.
9. On acquiring the loan from bank against the security of banks.

10. When many time the shares of trusts, finance and investment companies are valued.
11. When the shares of an Indian company are transferred by a non-resident.

12. Accounting to the standing orders of the court, valuation of shares takes place.

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Caselet Properly Planned Family Limited Partnership

How to Structure and Value Family Limited Partnerships

A significant part of our practice addresses the value of minority limited partnership
interests. Properly planned with an appropriate business purpose and by skilled legal
counsel, a family limited partnership can provide a vehicle for family asset management
and estate tax minimisation. In two recent cases, we valued non-marketable limited
partnership or limited liability corporation interests with specific reference to the actual
facts and circumstances of the partnership and operating agreements.
Each family transferred between ` 8.0 and ` 12.0 million of assets to the Partnership / LLC,
generally consisting of a portfolio of marketable securities, directly owned real estate and
investments in other partnerships (real estate).
ABA Approach and Solution

Using (i) what we call the specific factor rating system benchmarked to established
marketability and lack of control studies; (ii) the Mercer Quantitative Marketability
Discount Model (“QMDM”); (iii) the Kam/Schroeder studies; (iv) Partnership Profiles;
and (v) other published studies, ABA provides a reasoned and reconciled estimate of
the combined adjustment for differences in degree of marketability and control relative
to the subject minority interest being appraised. Essentially, we approach the problem
from four different viewpoints and then synthesise and reconcile our final estimate with
well-reasoned and documented opinion.
In each case, the families liked the concept and result so much that additional assets
were later contributed and the family limited partnership became the vehicle for estate
management, asset transition and wealth transfer.

In our experience, a reasoned and well-documented appraisal report prepared by a
qualified professional appraiser carries significant weight and is meaningful to the IRS. Our
experience suggests that the range of the combined adjustment (discount) for differences in
degree of marketability and control is from 40% – 52%. Of course, each circumstance and
partnership is unique and should be evaluated as such.

Source: http://www.businessval.com/resources/case_studies/planned_family_partnership.pdf

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