IRC § 409A Valuation Services

The Treasury Department and the Internal Revenue Service have put into place final regulations interpreting the deferred compensation rules under IRC Section 409A. Amounts subject to Section 409A that are deferred under a nonqualified plan are subject to current income taxation unless the nonqualified plan complies in form and in operation with the election, distribution and acceleration requirements of Section 409A.

Internal Revenue Service commentators have expressed concern with respect to the application of section 409A to stock options and stock appreciation rights. Specifically, the commentators have expressed concern that although the issuer of a stock right intended to establish an exercise price not less than the fair market value of the stock at the time of grant, the issuer of the stock right may not be able to demonstrate that the exercise price of the stock right was determined using a reasonable valuation method. Accordingly, where a taxpayer can demonstrate that the exercise price of a stock right granted was not less than the fair market value of the stock at the date of grant and that the value of such stock was determined using a reasonable valuation method, then that valuation will meet the requirements.

A Business Valuation (or stock valuation) is an appraisal that determines the fair market value of a business enterprise or its equity. Fair market value represents the price at which a willing buyer and a willing seller, both being informed of the relevant facts about the business, could reasonably conduct a transaction, neither person being under compulsion to do so.

The professionals at Cambridge Partners have performed business and/or stock valuations for companies engaged in numerous industries, including, but not limited to: retail, food & drink, medical, automotive, consumer services, software, technology, finance, rubber, transportation, chemical, pharmaceutical, insurance, finance and banking, professional services, entertainment and many others. The following illustrates valuations performed by our firm:

1. 409(a) valuation of a national branded food products company owned by a private equity group
2. Valuation of a specialty steel products business
3. Software company business valuation for a reporting unit of a Forbes 100 Japanese company
4. Stock valuation of a New York based talent agency which represents well known classical artists, instrumentalists and orchestras
5. Business valuations of several of the nation's largest branded food products companies
6. Valuation of the common and preferred stock of a specialty chemicals company in Texas
7. Common stock valuation of a Northern Europe domiciled metals business as part of a cross border tax strategy
8. Stock option valuation of a plastics company
9. Business valuation of a hi-growth pharmaceutical company
10. Valuation of a leading specialty products retailer