For American Society of Appraisers NYC, May 7, 2012                                  By Michael Gregory                   ...
   Opened Michael Gregory Consulting LLC    September 2011   28 years at IRS as engineer    valuator, manager, operation...
   Business Valuation Review   Risk Management   Alternative Dispute Resolution - Mediation   Will Go Over Some Exampl...
The opinions presented here are those of MichaelGregory. Michael Gregory does not represent theIRS. Any opinions presented...
   Working with the IRS    ◦ Organization    ◦ Raise Issues in Management   Some Key Issue Areas    ◦   Issue Resolution...
   Eleven Divisions   Compliance – Four Divisions   Appeals   Counsel – IRS and DOJ Tax Litigation Division   Your Pr...
   Good Source of Information for    ◦   Businesses    ◦   Starting a Business    ◦   Operating a Business    ◦   Closing...
   Six Industries and One Support Function   CTM, FS, HMT, NRC, RFPH, GHW,   Field Specialists    ◦   Engineering IRM 4...
   Internal Consultants to All Divisions   Four Territory Managers   32 Managers   300 Technical Employees (approx. 18...
   George Mathew (Acting)    Territory 4 Engineering    290 Broadway-Foley Square    New York City, NY 10007    TEL: (212...
   Examination    ◦ General    ◦ Estate and Gift (E&G) IRM 4.4.425      Classification Process      Owner (E&G Tax Atto...
   Business Valuator Issues    ◦   ESOP’s    ◦   Related for Profit Entities    ◦   Gifts in Kind    ◦   Services Provide...
   Case Closes Out of Examination Unagreed    and Goes to the Internal IRS Appeals Division   Goal to Settle Cases Due t...
   IRS Office of Chief Counsel    ◦ Operations    ◦ Technical      All Non Litigation Work       (legislative, regulatio...
   Who Owns the Case?   Who Manages the Case?   What is the Role of the Valuator?   Who can Resolve a Case?   Who can...
   Issue Resolution   Discount for Lack of Marketability   Potential Penalties   Reasonable Compensation   409A and V...
   SBSE    ◦ Mediation Formal Process [not working]    ◦ Informal Issue Resolution [ask for valuator]   LB&I    ◦ All En...
   Appeals    ◦ Hazards of Litigation    ◦ Ex Parte   Litigation    ◦ US Tax Court IRS Attorneys    ◦ US District Court ...
   DLOM Job Aid for IRS Professionals    ◦ http://www.irs.gov/pub/irs-utl/dlom.pdf    ◦ Read It    ◦ Use Best Practices [...
   On Appraisers 6695A    ◦ Follow Your Standards    ◦ Explain Why   On Tax Return    ◦ Overvaluation    ◦ Substantial U...
   Over Compensation Privately Held Companies    ◦ Compensation Compared with Firm Performance    ◦ Data Sources    ◦ Ind...
   Practice Aid from AICPA Under Review    ◦ Good Source    ◦ How to Allocate Stock      Preferred      Common Voting  ...
   Math   Logic   Standards   Documentation - Why   Written to Audience    ◦   Court    ◦   Client    ◦   IRS    ◦   ...
   Issue Resolution   Calculation Reports   Expert Witness   Intangibles   International Issues   Consultations     ...
© 2012 Michael Gregory        Consulting LLC    www.mikegreg.com     May 7, 2012   25
   Sources: BV Wire, NACVA Ambassador Quick    Read and Valuation Examiner, ASA BV    Conference in Chicago, Networking w...
   John Paglia Pepperdine Private Capital    Markets    ◦   Revenue        Successful Loans    ◦   $1 - $5 Mil           ...
   Know Who to Work With at the IRS   Raise Issues in Management as Appropriate   Issue Resolution – Mediation – Litiga...
   “How to Work with the IRS: Strategies for    Attorneys, Accountants, and Appraisers”   Three Parts    ◦ How to Work w...
   Business Valuation Review   Working with E&G on Valuation Issues    ◦ CA, NC, PA, TX   SBSE Reasonable Comp Closely ...
   Know Who Your Working with at the IRS   Understand the Role of Participants   Seek to Understand Interests   Do Not...
© 2012 Michael Gregory        Consulting LLC    www.mikegreg.com     May 7, 2012   32
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Asa nyc 5 7-2012

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American Society of Appraisers New York City May 7, 2012

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Asa nyc 5 7-2012

  1. 1. For American Society of Appraisers NYC, May 7, 2012 By Michael Gregory Michael Gregory Consulting LLC mg@mikegreg.com
  2. 2.  Opened Michael Gregory Consulting LLC September 2011 28 years at IRS as engineer valuator, manager, operations team lead, controller, acting assistant director, territory manager Championed IRS DLOM Job Aid, 6695A Penalty on Appraisers, Sub S, Reasonable Compensation, 409A, Family Limited Partnerships mg@mikegreg.com 651-633-5311 ASA, AVA, MBA, Qualified Neutral © 2012 Michael Gregory Consulting LLC www.mikegreg.com May 7, 2012 2
  3. 3.  Business Valuation Review Risk Management Alternative Dispute Resolution - Mediation Will Go Over Some Examples Could be of Service to You and Your Clients mg@mikegreg.com 651-633-5311 © 2012 Michael Gregory Consulting LLC www.mikegreg.com May 7, 2012 3
  4. 4. The opinions presented here are those of MichaelGregory. Michael Gregory does not represent theIRS. Any opinions presented in this seminar arethose of the author and do not represent anofficial position of his current or previousemployers. This material is offered foreducational purposes only. The author and hisemployer expressly disclaim anyliability, including incidental or consequentialdamages, arising from the use of this material orany errors or omissions that may be contained init. © 2012 Michael Gregory Consulting LLC www.mikegreg.com May 7, 2012 4
  5. 5.  Working with the IRS ◦ Organization ◦ Raise Issues in Management Some Key Issue Areas ◦ Issue Resolution ◦ Discount for Lack of Marketability ◦ Potential Penalties ◦ Reasonable Compensation ◦ 409A and Valuator ◦ Common Errors ◦ Strategic Growth Areas for Appraisers Observations Since Joining the Private Sector © 2012 Michael Gregory Consulting LLC www.mikegreg.com May 7, 2012 5
  6. 6.  Eleven Divisions Compliance – Four Divisions Appeals Counsel – IRS and DOJ Tax Litigation Division Your Primary Interest as Valuators ◦ Large Business and International (LB&I) ◦ Small Business and Self Employed (SBSE) ◦ Tax Exempt and Governmental Entities (TEGE) © 2012 Michael Gregory Consulting LLC www.mikegreg.com May 7, 2012 6
  7. 7.  Good Source of Information for ◦ Businesses ◦ Starting a Business ◦ Operating a Business ◦ Closing a Business ◦ Employer ID Numbers ◦ Small Business Events ◦ Industry Professions “Audit Techniques Guides (ATGs)” ◦ Over 50 topics ◦ Aerospace to Wine © 2012 Michael Gregory Consulting LLC www.mikegreg.com May 7, 2012 7
  8. 8.  Six Industries and One Support Function CTM, FS, HMT, NRC, RFPH, GHW, Field Specialists ◦ Engineering IRM 4.4.48 [4.4.48.4 (BV Guidelines)] ◦ Employment Tax ◦ Computer Audit Specialists ◦ Financial Products Counsel © 2012 Michael Gregory Consulting LLC www.mikegreg.com May 7, 2012 8
  9. 9.  Internal Consultants to All Divisions Four Territory Managers 32 Managers 300 Technical Employees (approx. 180 Credentialed Valuators) Managers Locally in NYC (3), Hartford (1), Newark (2) Valuators Locally – Real Property and BV © 2012 Michael Gregory Consulting LLC www.mikegreg.com May 7, 2012 9
  10. 10.  George Mathew (Acting) Territory 4 Engineering 290 Broadway-Foley Square New York City, NY 10007 TEL: (212) 436-1170 FAX: (908) 301-2192 © 2012 Michael Gregory Consulting LLC www.mikegreg.com May 7, 2012 10
  11. 11.  Examination ◦ General ◦ Estate and Gift (E&G) IRM 4.4.425  Classification Process  Owner (E&G Tax Attorney and E&G Manager) Collection Counsel © 2012 Michael Gregory Consulting LLC www.mikegreg.com May 7, 2012 11
  12. 12.  Business Valuator Issues ◦ ESOP’s ◦ Related for Profit Entities ◦ Gifts in Kind ◦ Services Provided ◦ Reasonable Compensation Initiatives © 2012 Michael Gregory Consulting LLC www.mikegreg.com May 7, 2012 12
  13. 13.  Case Closes Out of Examination Unagreed and Goes to the Internal IRS Appeals Division Goal to Settle Cases Due to Hazards of Litigation Targets Independent Ex Parte Rules © 2012 Michael Gregory Consulting LLC www.mikegreg.com May 7, 2012 13
  14. 14.  IRS Office of Chief Counsel ◦ Operations ◦ Technical  All Non Litigation Work (legislative, regulation, interpretation)  Corporate  International  Technical Advice IRS Division Counsel IRS Special Trial Counsel DOJ Tax Litigation Division © 2012 Michael Gregory Consulting LLC www.mikegreg.com May 7, 2012 14
  15. 15.  Who Owns the Case? Who Manages the Case? What is the Role of the Valuator? Who can Resolve a Case? Who can Settle a Case? If you have a Frustration on a Case Who Do Contact? Let’s Discuss Some Key Issue Areas © 2012 Michael Gregory Consulting LLC www.mikegreg.com May 7, 2012 15
  16. 16.  Issue Resolution Discount for Lack of Marketability Potential Penalties Reasonable Compensation 409A and Valuator Common Errors Strategic Growth Areas for Appraisers © 2012 Michael Gregory Consulting LLC www.mikegreg.com May 7, 2012 16
  17. 17.  SBSE ◦ Mediation Formal Process [not working] ◦ Informal Issue Resolution [ask for valuator] LB&I ◦ All Engineers “Trained” in Mediation ◦ Work with Business Valuator and Engineering Manager ◦ Elevate as Needed ◦ Other Initiatives © 2012 Michael Gregory Consulting LLC www.mikegreg.com May 7, 2012 17
  18. 18.  Appeals ◦ Hazards of Litigation ◦ Ex Parte Litigation ◦ US Tax Court IRS Attorneys ◦ US District Court (DOJ Tax Lit Div)  Judge  Jury ◦ US Court of Claims (DOJ Tax Lit Div) © 2012 Michael Gregory Consulting LLC www.mikegreg.com May 7, 2012 18
  19. 19.  DLOM Job Aid for IRS Professionals ◦ http://www.irs.gov/pub/irs-utl/dlom.pdf ◦ Read It ◦ Use Best Practices [33 Factors, IDR, Review, Report, Critiques] ◦ Make Sure to Note Caveats – Don’t Skip In Addition ◦ Espen Robak – Pluris DLOM ◦ John Finnerty – Asian Options Method © 2012 Michael Gregory Consulting LLC www.mikegreg.com May 7, 2012 19
  20. 20.  On Appraisers 6695A ◦ Follow Your Standards ◦ Explain Why On Tax Return ◦ Overvaluation ◦ Substantial Understatement Who is Client Going to Go After? Have Good Insurance © 2012 Michael Gregory Consulting LLC www.mikegreg.com May 7, 2012 20
  21. 21.  Over Compensation Privately Held Companies ◦ Compensation Compared with Firm Performance ◦ Data Sources ◦ Independent Analysis Subchapter S Under Compensation ◦ Avoid Employment and Other Taxes ◦ Growing Initiative at IRS © 2012 Michael Gregory Consulting LLC www.mikegreg.com May 7, 2012 21
  22. 22.  Practice Aid from AICPA Under Review ◦ Good Source ◦ How to Allocate Stock  Preferred  Common Voting  Common Non Voting ◦ How to Value Stock Options  Black Sholes  Lattice Methods – Bi-Nomial Most Common © 2012 Michael Gregory Consulting LLC www.mikegreg.com May 7, 2012 22
  23. 23.  Math Logic Standards Documentation - Why Written to Audience ◦ Court ◦ Client ◦ IRS ◦ Lay Person © 2012 Michael Gregory Consulting LLC www.mikegreg.com May 7, 2012 23
  24. 24.  Issue Resolution Calculation Reports Expert Witness Intangibles International Issues Consultations © 2012 Michael Gregory Consulting LLC www.mikegreg.com May 7, 2012 24
  25. 25. © 2012 Michael Gregory Consulting LLC www.mikegreg.com May 7, 2012 25
  26. 26.  Sources: BV Wire, NACVA Ambassador Quick Read and Valuation Examiner, ASA BV Conference in Chicago, Networking with Valuators and Their Clients John Finnerty Asian Option Model Big 4 Pluris Espen Robak Secondary Markets Valuation Advisors Largest Data Base and Int’l Ashok Abbott Liquidity Analysis from Public Markets © 2012 Michael Gregory Consulting LLC www.mikegreg.com May 7, 2012 26
  27. 27.  John Paglia Pepperdine Private Capital Markets ◦ Revenue Successful Loans ◦ $1 - $5 Mil 44% ◦ $5 - $25 Mil 72% ◦ >$25 Mil 90% Question – Where Does Your Client Obtain Funds and Where Is FMV Source for Funds? © 2012 Michael Gregory Consulting LLC www.mikegreg.com May 7, 2012 27
  28. 28.  Know Who to Work With at the IRS Raise Issues in Management as Appropriate Issue Resolution – Mediation – Litigation IRS Job Aide on DLOM’s Worth Reading Appraiser Penalties 6695A – Standards Reasonable Compensation 409A and Valuator Courts More Analytically Oriented Avoid Common Errors Think Strategically About What You Want to Do © 2012 Michael Gregory Consulting LLC www.mikegreg.com May 7, 2012 28
  29. 29.  “How to Work with the IRS: Strategies for Attorneys, Accountants, and Appraisers” Three Parts ◦ How to Work with the IRS ◦ Field Specialist Engineering and Valuation Key Issues ◦ Strategic Thinking with Do’s and Don’ts Analogy with International Examiners and Economists © 2012 Michael Gregory Consulting LLC www.mikegreg.com May 7, 2012 29
  30. 30.  Business Valuation Review Working with E&G on Valuation Issues ◦ CA, NC, PA, TX SBSE Reasonable Comp Closely Held Co SBSE DOJ SBSE Appeals TEGE with Related Entities LB&I 409A LB&I Transfer Pricing © 2012 Michael Gregory Consulting LLC www.mikegreg.com May 7, 2012 30
  31. 31.  Know Who Your Working with at the IRS Understand the Role of Participants Seek to Understand Interests Do Not Be Afraid to Ask Questions Consider Options ◦ Ask for a Valuator ◦ Ask to Elevate in Management as a Neutral Party Given Ownership of the Issue by the RA or ETA © 2012 Michael Gregory Consulting LLC www.mikegreg.com May 7, 2012 31
  32. 32. © 2012 Michael Gregory Consulting LLC www.mikegreg.com May 7, 2012 32

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