Revenue Ruling 59-60
 

Since 1959 the business valuation industry has evolved significantly. Today valuation techniques including arbitrage pricing theory, capital asset pricing models, discounted cash flow and many other approaches unknown back then. So 59-60 is not the be-all and end-all, but it remains a compilation of sound wisdom as well as the legal framework.

In valuing the stock of closely-held corporations, or the stock of corporations where market quotations are not available, all other available financial data, as well as all relevant factors affecting the fair market value must be considered for estate tax and gift tax purposes. No general formula may be given that is applicable to the many different valuation situations arising in the valuation of such stock. However, the general approach, methods and factors which must be considered in valuing such securities are outlined. 

The purpose of this Revenue Ruling is to outline and review in general the approach, methods and factors to be considered in valuing shares of the capital stock of closely-held corporations for estate tax and gift tax purposes. The methods discussed herein will apply likewise to the valuation of corporate stocks on which market quotations are either unavailable or are of such scarcity that they do not reflect the fair market value. It is advisable to emphasize that in the valuation of the stock of closely-held corporations or the stock of corporations where market quotations are either lacking or too scarce to be recognized, all available financial data, as well as all relevant factors affecting the fair market value, should be considered. The following factors, although not all-inclusive, are fundamental and require careful analysis in each case:

• The nature of the business and the history of the enterprise from its inception.
• The economic outlook in general and the condition and outlook of the specific industry in particular.
• The book value of the stock and the financial condition of the business.
• The earning capacity of the company.
• The dividend-paying capacity.
• Whether or not the enterprise had goodwill or other intangible value.
• Sales of the stock and the size of the block of stock to be valued.
• The market price of stocks of corporations engaged in the same or a similar line of business having their stocks actively traded in a free and open market, either on an exchange or over-the-counter.

Our goal is to provide our clients with the valuation assistance needed for them to achieve their business objectives.  Professionals at Enterprise Appraisal Company use 37 years of valuation experience to provide our clients with impartial and fully compliant valuations with full documentary support.