I found a small logical inconsistency in my general-purpose valuation report template (that lays out all three approaches to value).
Until now, when I calculated the liquidated value of a business, I often made a small (5% of liquidated value) deduction for expenses (such as sales commissions). Upon reflection, I think that was wrong. In the Market Approach, I do not take a deduction for these expenses (even though the premise of the approach is a sale of the business). In the Income Approach, I also do not take a deduction (because the premise is that the interest will be held indefinitely, not sold). It is inconsistent to take the deduction in one approach and not the others.
I still believe, of course, that deductions for income and capital gains tax liabilities should be taken under all approaches when indicated (even for “S” corporation distributions to cover shareholders’ personal income tax liabilities). I also believe that, under the Asset Approach, deductions for delayed receipt of asset sale proceeds (based on fixed asset appraisers’ input) as well as asset value erosion (uncollectible receivables, bad inventory, etc.) are still appropriate.