For the Estate Planning Council of Central Florida November 14,
2013 Michael Gregory Michael Gregory Consulting LLC
Slide 2
Michael Gregory, Chief Manager, Michael Gregory Consulting LLC
since September 12, 2011 Formerly IRS 28 Years as Engineer and
Valuer, Manager, Operations Team Lead, Controller, Acting Assistant
District Director, Territory Manager Qualified Neutral Supreme
Court in MN, ASA, CVA, and MBA November 14, 2013 2013 Michael
Gregory Consulting LLC [email protected]
Slide 3
Risk Management, BV Review, and IRS Assistance Alternative
Dispute Resolution Strategic Planning and Value Added Services Will
Go Over Some Examples Could be of Service to You and Your Clients
[email protected] 651-633-5311 November 14, 2013 2013 Michael Gregory
Consulting LLC [email protected]
Slide 4
The opinions presented here are those of Michael Gregory.
Michael Gregory does not represent the IRS. Any opinions presented
in this seminar are those of the author and do not represent an
official position of his current or previous employers. This
material is offered for educational purposes only. The author and
his employer expressly disclaim any liability, including incidental
or consequential damages, arising from the use of this material or
any errors or omissions that may be contained in it. November 14,
2013 2013 Michael Gregory Consulting LLC [email protected]
Slide 5
How to Work with the IRS: Strategies for Attorneys, Accountants
and Appraisers (June 2011) Business Appraisals and the IRS (May
2013) Valuing Interests in S-Corps (July 2013) DLOMs and the IRS
(September 2013) November 14, 2013 2013 Michael Gregory Consulting
LLC [email protected]
Slide 6
IRS Background Estate and Gift Tax at the IRS IRS
Classification and Processing Steps You Can Take Working With the
IRS on Valuation Issues Issue Resolution Three Technical Areas
November 14, 2013 2013 Michael Gregory Consulting LLC
[email protected]
Slide 7
Historical Perspective Today Eleven Divisions with External
Stakeholders Compliance Divisions-Since 2000-Different Cultures
Appeals Counsel IRS and DOJ Tax Litigation Division Your Primary
Interest is with Estate and Gift (E&G)Tax Attorneys in the
Small Business and Self Employed Division, (SBSE) but could relate
to the Large Business and International (LB&I) and Business
Valuators in Engineering November 14, 2013 2013 Michael Gregory
Consulting LLC [email protected]
Slide 8
Estate and Gift Forms and Publications Pub 950 Intro to E&G
Taxes Marketing Information From 709 US Gift (and Generation
Skipping Transfer) Tax Return SOI Statistics 18% of Estates and
1.2% of Gifts Audited in the Field from the 2011 Data Book Whats
New in Estate and Gift Audit Technique Guides Aerospace to Wine
with over 50 Topic Areas (See auditing Attorneys) November 14, 2013
2013 Michael Gregory Consulting LLC [email protected]
Slide 9
Examination and Collection Functions Examination General Team
Manager and Revenue Agent Estate and Gift (E&G) Classification
Process (Cincinnati and Ogden Service Centers) 706 and 709 to
Cincinnati Certain Projects Ogden E&G Manager with Estate Tax
Attorney Information Document Requests Counsel November 14, 2013
2013 Michael Gregory Consulting LLC [email protected]
Slide 10
Case Manager and Team Coordinator Six Industries and One
Support Function CTM, FS, HMT, NRC, RFPH, and GHW Specialists
Internal Consultants Engineering and Valuation Note Geographic
Location Note Specialization Computer Audit Specialists Financial
Products Economists International Examiners Counsel November 14,
2013 2013 Michael Gregory Consulting LLC [email protected]
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Why Engineering Title? Internal Consultants to All Divisions
Four Territory Managers 34 Front Line Managers 320 Technical
Employees Valuators Locally Real Property and Business Valuation
Know Who They Are and Invite Them to Professional Meetings November
14, 2013 2013 Michael Gregory Consulting LLC [email protected]
Slide 12
Case Closes Out of Examination Unagreed and Goes to the
Internal IRS Appeals Division Goal to Settle Cases Independent Ex
Parte Rules Ways to Approach November 14, 2013 2013 Michael Gregory
Consulting LLC [email protected]
Slide 13
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 November 14, 2013 2013
Michael Gregory Consulting LLC [email protected]
Slide 14
Issue Resolution Lowest Level Emphasis on Timeliness,
Understanding, Enforcement, Integrity, Fairness Factually Oriented
Resolution; not Hazards of Litigation Division Dependent What Level
and With Whom are the Key? November 14, 2013 2013 Michael Gregory
Consulting LLC [email protected]
Slide 15
Managers and Employees Trained Awareness There Recent
Commissioner Report on the Process More Authority Needed at Front
Line Level More Training Needed 242 Cases with 572 Returns 124
Cases or 51% Fully Resolved Average Time Frame 86 Days Goal 60 Days
Now at 104 Days Normal Case Not in Formal Mediation When to Elevate
and to What Level? November 14, 2013 2013 Michael Gregory
Consulting LLC [email protected]
Slide 16
Field Specialists Engineers and Valuators Trained in Mediation
Informal Process Model FIFI What are the Facts? What are the
Issues? How do you Feel about this? What are your Interest? Now
lets explore solutions. November 14, 2013 2013 Michael Gregory
Consulting LLC [email protected]
Slide 17
Employees Trained in the Process of Mediation DVD Made for New
Hires Elevation in Management is Sometimes Needed to Explore the
Process Elevating in Management is Encouraged When Differences Are
Associated with Other Than The Technical Issue If Not Resolved When
to Elevate and to What Level? November 14, 2013 2013 Michael
Gregory Consulting LLC [email protected]
Slide 18
Who Owns the Case? Who Manages the Case? What is the Role of
the Valuator? If you Have Frustrations with the E&G Attorney
Who Should You Contact? If you Need a Real Property Appraiser or
Business Valuator What Should You Do? Coming up Next November 14,
2013 2013 Michael Gregory Consulting LLC [email protected]
Slide 19
Discount for Lack of Marketability -Job Aid for IRS
Professionals 9/25/2009 published 8/22/2011 Data Sources Private
Placement Step 1Pluris Step 1 Fair Market Value Opinions Pre-IPO
Recommended Approaches Restricted Stock Studies and Factors Private
Placements Step 1 and Factors Third Method and Reconcile November
14, 2013 2013 Michael Gregory Consulting LLC [email protected]
Slide 20
Six Court Cases Key Findings from the Estate of Louise Paxton
Gallagher TCM 2011-148 Take Away Information Prominent Methods
Suggestion on Approach for IRS Purposes Work with Your Business
Valuation Appraiser November 14, 2013 2013 Michael Gregory
Consulting LLC [email protected]
Slide 21
Read the Document Have Attorney Provide Opinion on Limited
Interest Ownership Rights Consider Approval Rights for Major
Decisions Unanimous Decisions High Percentage Decisions Majority
Decisions Business Purpose, Contributions, Distributions, Term,
Withdraw, Right of First Refusal, Transferability, Fire General
Partner, Dissolution, Restructure Agreement FMV and Discounts
November 14, 2013 2013 Michael Gregory Consulting LLC
[email protected]
Slide 22
Legal Requirement for an Appraisal When Might a Calculation
Report Be Acceptable on Audit? Does Your Client Need a Real
Property Appraisal? What a Business Appraiser Needs to State in
Limiting Conditions without a Real Property Appraisal Implications
on Classification November 14, 2013 2013 Michael Gregory Consulting
LLC [email protected]
Slide 23
November 14, 2013 2013 Michael Gregory Consulting LLC
[email protected]
Slide 24
SBSE Examination Case with a Business Valuation
Issue-Publication 1 Concerns Boston, Denver, Florida, Georgia, New
York, North Carolina, Philadelphia, San Francisco, San Antonio SBSE
Examination Case with IRS Counsel or DOJ Understand Roles of
Attorney and Appraiser Work to Resolve Prepare Report for Judge
SBSE Case at Appeals Understand ExParte Understand New Information
and Mediation November 14, 2013 2013 Michael Gregory Consulting LLC
[email protected]
Slide 25
SBSE Examination Case with a Business Valuation Issue 6 months
on Statute No IRS Valuator/Appraiser DLOM only Issue DLOM Paper
Applied to Facts Issue Resolution High Wealth Example Three
Siblings and Charities Resolve with All November 14, 2013 2013
Michael Gregory Consulting LLC [email protected]
Slide 26
LB&I and SBSE Planning Initiate Process with High Wealth
Individuals Ahead of Time Family Issues Mediation Approaches Plan
Out Company and Wealth Transfer 6695A Appraiser Penalties Impact on
Appraisers Know the Rules Appraisers Need to Follow Standards 6661
Overvaluation and Substantial Understatement Penalty on Return
November 14, 2013 2013 Michael Gregory Consulting LLC
[email protected]
Slide 27
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 Business Valuator or an
Appraiser Ask to Elevate in Management as a Neutral Party Given
Ownership of the Issue by the RA or ETA November 14, 2013 2013
Michael Gregory Consulting LLC [email protected]
Slide 28
November 14, 2013 2013 Michael Gregory Consulting LLC
[email protected]
Slide 29
IRS Official and Unofficial Rules of Engagement IRS
Organization My History and Best Practices Issue Resolution and
Mediation at the IRS Classification in General and Estate and Gift
in Particular Potential Penalties on Appraisers Reasonable
Compensation in Corporations Discounts for Lack of Marketability
Most Common Errors in Valuations Strategic Growth Areas of Business
Valuation Appraisers Other Engineering Issues and Valuation Related
Issues Strategic Thinking Overall Commentary and Dos and Donts
November 14, 2013 2013 Michael Gregory Consulting LLC
[email protected]
Slide 30
November 14, 2013 2013 Michael Gregory Consulting LLC
[email protected]
Slide 31
1. Overview of Chapter Contents 2. Classification in General
and in Estate and Gift Tax in Particular 3. Writing a Business
Valuation Report for IRS Tax Purposes 4. Potential Penalties on
Appraisers 5. Considerations in Valuing Interests in Subchapter S
Corporations 6. How to Address Reasonable Compensation in
Corporations 7. Code Section 409A and Valuators 8. Discount for
Lack of Marketability and How to Approach the Issue 9. Most Common
Errors in Valuations and How to Avoid Them 10. Potential Growth
Areas for Business Valuation Appraisers 11. How to Work with the
IRS to Resolve Differences in Valuation 12. Key Take-Away Items for
Business Valuation Appraisers November 14, 2013 2013 Michael
Gregory Consulting LLC [email protected]
Slide 32
November 14, 2013 2013 Michael Gregory Consulting LLC
[email protected]
Slide 33
From Chapter 5 in Business Appraisals and the IRS Pulled This
Chapter from the Book Given Customer Feedback Covers the Material
in This Presentation with 2 Example Comparisons Sixty Three Pages
in Length November 14, 2013 2013 Michael Gregory Consulting LLC
[email protected]
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November 14, 2013 2013 Michael Gregory Consulting LLC
[email protected]
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Uses the Discount for Lack of Marketability Job Aid for IRS
Valuation Professionals Published August 2011 Supplemented With
Commentary from Modelers Critiqued in the Original Job Aid Michael
Gregorys Commentary Based on IRS and Private Sector Reviews of
Scores of Reports for Expert Witnesses Specific Recommendations
November 14, 2013 2013 Michael Gregory Consulting LLC
[email protected]
Slide 36
Michael Gregory Consulting, LLC [email protected]
www.mikegreg.com 651-633-5311 1945 Sharondale Ave. Roseville, MN
55113 Contact me with any questions or concerns November 14, 2013
2013 Michael Gregory Consulting LLC [email protected]
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November 14, 2013 2013 Michael Gregory Consulting LLC
[email protected]
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November 14, 2013 2013 Michael Gregory Consulting LLC
[email protected]