Most of my valuations are for estate and gift taxes, concern family-owned businesses, and involve gifts or sales to family members of 100%, control and / or minority interests.
Sometimes my clients’ motivations are simply to minimize their estates and the associated estate and gift taxes. This usually happens when the senior generation is well to do. Their strategy is clear: phased gifts or sales of non-marketable minority interests with appropriate valuation discounts. Parents are happy to minimize their estates and taxes, and children are happy (if buying shares) with the low prices. (Their hidden cost: a low tax basis cost when THEY sell or gift shares, but that is far in the future and of little present concern or cost.)
When the parents are not well to do, or most of their wealth is tied up in the business, they certainly want to minimize taxes, but are not willing or able to transfer everything at discounted values, because they need the money. This requires a great deal of planning up front, because on the one hand they want to minimize taxes but on the other hand they do not want to minimize the value received. Now they must consider whether to sell the business to the children as a whole (no discounts), maybe sell a controlling interest (at an appropriate premium), or something else (maybe adopting a buy-sell agreement that stipulates non-discounted or pro rata shares of fair market value).
Sometimes the second objective – not necessarily minimizing value received – does not come up immediately at the outset of the engagement. It DOES when they see that the values of the phased minority interest gifts or sales do not give them enough money.
Always be aware of this potential complexity – it could mean a little more work for you, but if you try to determine the clients’ motives at the outset, it will not be a great deal more work.