Appraisal Economics has determined the fair market value of an unsecured promissory note for gift and estate tax planning purposes. The note was issued by a real estate holding entity and bears interest at the applicable federal rate (AFR). The Internal Revenue Code permits loans at what are often considered favorable interest rates to avoid being treated as taxable gifts if the interest rate is at least equal to the AFR. Taxpayers have used this provision to make loans to related parties and as part of an estate planning strategy. We valued the note using the discounted cash flow method of the income approach and selected a discount rate that accounted for the tenor of the note and the creditworthiness of the debtor. 

Please click for more information about our appraisals of debt instruments and gift and estate tax planning.

Appraisal Economics has determined the fair market values of the preferred equity of an Indian animation company that specializes in the production of comics and stories on mobile and digital platforms. The company has produced over 500 animated episodes that have been published across television and digital platforms such as Amazon Prime Video, Cartoon Network, Disney+, and Netflix. Appraisal Economics valued the preferred equity by using an option pricing model to replicate the payoffs to the differing equity classes and allocate the total equity among the capital stack.

Please click to learn more about our experience in the media and entertainment industries and our experience
with estate tax planning.

Appraisal Economics Inc. has performed a transfer pricing study for a multinational financial investment advisory firm. We used the Comparable Profits Method (CPM) to determine the appropriate rate that the Mexicanbased advisory company should charge its U.S.based affiliate, both in terms of profit margin and a markup on costs incurred. This allows the firms to comply with U.S. Treasury Regulation Section §1.66626(b)(3), which requires the firms to demonstrate reasonable cause and good faith that the transfer price between the entities in different jurisdictions complies with Internal Revenue Code Section §1.482. This ensures that the taxpayers properly account for income attributable to transactions with controlled or related affiliates in each country.

Please click for more information about transfer pricing.

Appraisal Economics Inc. has appraised a minority, noncontrolling interest in a startup entity. The alternative investment company specializes in litigation financing. The company provides cash advances to plaintiffs involved in ongoing or future litigation in return for a share of the proceeds if and when the plaintiff is successful. We valued the newly formed venture’s business enterprise using the discounted cash flow method of the income approach. Although earlystage companies are higher risk, this entity will operate partially in conjunction with a related, and established firm. Accordingly, we estimated the cost of equity by considering a cost of equity indicated by the traditional CAPM and also venture capital rates of return surveyed from a wide range of sources in Appraisal Economics’ library. We considered the lack of control and lack of marketability inherent in the subject interest.

Please click to learn more about business valuation and our experience with privately held ventures.

Appraisal Economics has determined the fair market value of minority interests in a National Basketball Association (NBA) team and an English Premier League (EPL) soccer club. In both cases, we determined the business enterprise value and the corresponding equity value using the subject transaction and guideline transaction methods of the market approach. We reviewed historical transactions of each team’s equity, along with transactions involving comparable teams in the NBA and EPL. Next, we applied the derived market multiples to each subject entity to develop indications of fair market value. To support the market approach, we also considered the valuation multiples indicated in the latest industry research. Our valuation included adjustments to the pro rata values of the subject interests to account for their lack of control and lack of marketability. The gap in valuation multiples applicable to the NBA franchise and the EPL club was consistent with what we see in our work across professional sports, reflecting the higher financial risk involved under the promotion and relegation system used in European football.

Learn more about our experience in the sports industry.

Appraisal Economics has determined the equity value of a coffee roasting franchise. The company has multiple retail locations and a large wholesale segment. We determined the business enterprise value and the corresponding equity value of the company using the discounted cash flow method of the income approach and the guideline company method of the market approach. Key issues included the potential effects of tariffs on the coffee industry and the possibility of expansion through additional franchise locations. The results of our analysis were used for management planning purposes.

Learn more about business valuation and our work in the food and beverage industry.

Appraisal Economics has determined the fair market value of Super Bowl tickets for charitable donation purposes.  When valuing the tickets, we consider the price paid by the donor as well as the asking sale prices for tickets listed on secondary marketplaces that are closest to the tickets being valued in terms of location and proximity.  Although the purchase price can be a reasonable indication of fair market value since it represents a transaction without any compulsion or time constraints and reflects the actual premium nature of the seats underlying the tickets, the number of days that have passed between the purchase date and the donation date must be considered as supply and demand factors may have changed during that time.  The comparable tickets from secondary marketplaces provides a stronger indication of fair market value as it reflects the supply and demand situation for the tickets on the donation date.

Please click for more information about the valuation of tickets for charitable donations purposes.

Appraisal Economics has valued accelerated barrier notes linked to the returns of the S&P 500 Index. The notes are complex securities that provide upside leveraged returns in excess of the S&P 500, while providing barrier protection for part of the downside. Appraisal Economics has a deep understanding of the option pricing models used in valuing complex securities and derivative instruments such as the barrier notes. We valued the barrier notes using modified Monte Carlo simulation combined with a credit analysis of the issuer, considering the complex relationship among the underlying assets, the barrier levels, and market conditions.

Appraisal Economics has provided an executive compensation analysis for the senior executives of a large privately held business.  Our compensation study considered the total value and components of appropriate compensation packages, considering the internal characteristics and goals of the subject company, the compensation for executives of similar private companies and public companies within the subject company’s industry, and executive compensation practices among both private and public companies.  Our compensation analysis provided recommendations for alternate compensation structures, including base salary, bonuses and other short-term incentives, and long-term compensation, including performance awards structured to align compensation with company goals and performance.

Appraisal Economics has valued bankruptcy claims on the assets of FTX Trading Ltd.  FTX was a large cryptocurrency exchange and trading platform that abruptly collapsed and filed for bankruptcy and whose CEO, Sam Bankman-Fried, was found guilty of fraud and money laundering.  The bankruptcy trustee is working to find and collect FTX assets to provide to FTX’s clients and victims.  Those who are unable or unwilling to wait for the ultimate outcome of the bankruptcy proceedings can sell their claims to investors with more risk tolerance.  The value of a bankruptcy claim depends on due diligence regarding the validity and likelihood that the claim will be accepted by the bankruptcy trustee, the claim’s seniority and preference amounts, the value and volatility of the underlying assets, asset recovery expenses, and the expected time until the bankruptcy estate is settled.  Appraisal Economics valued the FTX bankruptcy claims for gift and estate tax planning purposes.

Please click for more information about the valuation of cryptocurrency assets and valuations related to bankruptcy and gift and estate tax planning purposes.