Professor Bogdanski’s Article Published in Estate Planning

Professor Jack Bogdanski’s article, Courts Finally Warm to “Tax Affecting,” was published in the May 2020 issue of Estate Planning. The article explores the effects of two recent case opinions which allow “tax affecting” in valuing ownership interests in S corporations and partnerships.

“Tax affecting” is a technique that takes into account the tax differences between S corporations and comparable public companies by reducing the projected income of the S corporation by a hypothetical corporate-level tax. While this technique has been common with valuation experts, courts have been hesitant to apply it in federal tax cases. However, in 2019 two court decisions have opened the door for “tax affecting” the earnings of S corporations and even partnerships. This article addresses the issues surrounding the technique and the potential consequences of these recent case opinions.