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R. Klein, EA
R. Klein, EA, Enrolled Agent
Category: Capital Gains and Losses
Satisfied Customers: 263
Experience:  Over 20 Years experience in resolving tough tax cases
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How does a Business valuation work in preparing a "C"

Customer Question

How does a Business valuation work in preparing a "C" Corporation's final Taxes
after the Business has been sold? the "C" Corp. was not sold--only the business clients and office Assets were sold.
Submitted: 1 year ago.
Category: Capital Gains and Losses
Expert:  Jonathan Tierney replied 1 year ago.

Hi, my name is ***** ***** I can help. A business valuation is usually done before a business (or all the business's assets) are sold so the buyer and seller have a better idea of how to value the business. Why do you need a business valuation after selling the business?

Most C corporations liquidate after selling their business. However, if the operating business was sold and the only assets left is the cash and other investments from the sale, the corporation would be valued (generally at a discount) based upon the fair market value of the assets it holds. The discounted value is often helpful for estate and gift taxes as the assets can be transferred for less than their full fair market value. For example if the corporation holds $500K in stocks and bonds and its discounted value is $375K, a gift can be made to heir valuing the stock at $375K. If the corporation then liquidates, the shareholders receive the full value of the corporation's assets. In addition, the gain on the liquidation of the corporation's stock can then be spread out over more family members.

Let me know why you think you need a business valuation so I can provide you with a better answer.

Thanks, Jonathan