Over the years Valuation Services, Inc. has valued hundreds of fractional ownership interests in various entities. Over this time period VSI has determined the valuation discounts to be used in gift and estate tax returns for numerous clients and has defended these valuation discounts at various levels, including negotiating with IRS agents and in the United States Tax Court. In fact, at a recent Tax Court case, the professionals at VSI were identified by the court as the more credible expert witnesses in the case at hand.

Much has been written about the validity of valuation discounts and about how to quantify such discounts. Theories have been established, complex models have been developed, and various studies have been analyzed in order to defend these discounts.

The proof, however, is in the pudding. At VSI, we like pudding!

The following chart shows the results of eighteen valuation reports showing the final valuation discount accepted by the IRS. The following includes estates where VSI has received closing letters, negotiated settlements with IRS agents, or as in one case, the Tax Court has made its determination of value based on VSI’s work.

At VSI, we have also created a database of internal rate of return (IRR) that are utilized in the VSI valuation process. The IRR reflects the same discount concepts as the chart above. These IRRs are critical to most valuations and, in our opinion, provide fundamental valuation tools that put VSI’s reports a step ahead of our competitors. We have watched, with great pride, as the rest of the valuation industry has started to adapt valuation methodologies that VSI has relied upon for many years.