A U.K. utility purchased a large U.S. electric power company, partially financing the transaction with intercompany loans made to a U.S. holding entity. The Internal Revenue Service challenged the deductibility of interest payments made by the U.S. subsidiary, on the grounds that the intercompany loans did not constitute bona fide indebtedness. MSG was retained by the Petitioner to assess the U.S. holding company’s ability to pay its debts as they became due. We also analyzed the value and capital structure of the consolidated U.S. entities and provided testimony at trial.
A personal holding company held a portfolio of assets, mostly comprised of marketable securities. The holder of a minority stake in the company passed away. The estate applied discounts for lack of control, lack of marketability, and built-in (or “trapped”) capital gains. The Internal Revenue Service engaged MSG to evaluate the reasonableness of the estate’s discounts and to value the decedent’s interest as of the date of death.
MSG was retained on behalf of the estate of a major airline carrier to analyze the carrier’s method of depreciating its aircraft. The engagement focused on depreciation attributed to the aircraft while in use over the United States and its territories versus depreciation attributed to the aircraft when flown overseas.
A U.S. manufacturer of materials testing equipment purchased a foreign company operating in the same field. Following the acquisition, the U.S. parent company transferred the foreign subsidiary’s technology to the United States. MSG applied a variety of techniques to value the transferred technology for financial reporting and tax purposes.
A manufacturer of equipment used in the paper industry was acquired in a leveraged buyout. The Internal Revenue Service questioned whether the investment banking fee paid in connection with the transaction was for the long or short-term benefit of the company. MSG was retained by the IRS to analyze the transaction and determine a reasonable time period over which the fees should be amortized.
A U.S. asset management company conducted its marketing through a Cayman Islands subsidiary. The Internal Revenue Service asserted that the company allocated a disproportionately high fraction of its revenue to this Cayman Islands entity, thus lowering its taxable U.S. income. MSG was retained by the IRS to determine the reasonable fees and costs associated with the Cayman Islands office.
A multinational corporation merged two of its U.S. subsidiaries. One subsidiary (“Company A”) had significant profits and the other (“Company B”) had significant accumulated net operating losses. A Big Four accounting firm was retained to opine as to the relative value of Company A and Company B as of the date of the merger. MSG was retained by the company to review and test the methods employed and conclusions reached by the accounting firm.
The controlling shareholder of a closely-held manufacturer sought to transfer a 50 percent interest in the business to his son. MSG was retained to determine the fair market value of the business as of the date of transfer. Issues analyzed included the impact of the company’s S-Corporation status on value, as well as the appropriate discounts for lack of marketability and lack of control.
A state department of revenue challenged the deductions taken for intangible drilling expenses by investors in oil and gas exploration partnerships. The dispute focused on the economic substance of investments made by partners in the drilling partnerships, and by the drilling partnerships in oil and gas development. MSG was retained by Petitioner to analyze the economics of the partnerships and the oil and gas industry, model investor returns under various scenarios, and provide expert testimony at trial.
A U.S. domiciled company engaged in a merger with a foreign peer, with the surviving company headquartered outside of the U.S. Pursuant to the transaction, the company proposed to put in place various financing arrangements between its U.S. and foreign holding companies. MSG was retained by the company to assess the U.S. holding company’s ability to pay its debts as they became due, giving effect to the new indebtedness, as well as to value and analyze the capital structure of the consolidated U.S. entity.
A foreign company entered the U.S. market through a series of corporate acquisitions. These acquisitions were financed through loans made by the foreign parent to its chief U.S. subsidiaries. The state in which these U.S. subsidiaries were located challenged the validity of this intercompany debt. MSG was engaged by the Petitioner to assess the U.S. borrowers’ ability to pay their debts as they became due and creditworthiness. In connection with this task, MSG created financial projections for the U.S. subsidiaries at various points in time, and analyzed the financial impact of the company’s many acquisitions and divestitures.
A parent company (“Parent”) made a loan to a subsidiary, a holding company (“Holdco”) in another tax jurisdiction. Holdco’s only asset was the stock of an operating company (“Opco”) in the same tax jurisdiction. The tax authorities in Holdco’s tax jurisdiction challenged the validity of the intercompany debt. Specifically, the authorities claimed that the interest rate was too high given the public debt ratings of both Parent and Opco. MSG was retained by the company to analyze and opine on the credit rating of Holdco.
A taxpayer challenged the Internal Revenue Service’s (IRS) valuation of a family limited partnership consisting of real estate, securities, a shareholder loan, and cash. The valuation dispute centered on the appropriate level of minority interest and lack of marketability discounts. MSG analyzed the discounts applied to the underlying net asset values.
On behalf of the Internal Revenue Service (IRS), MSG was retained to critique the value placed on shares of a privately-held aerospace electronic instruments manufacturer that the taxpayer gifted to family members. We valued the stock of the company as of the gift date. Our report also included a trend-analysis for the industry and a review of investment banking activities pertaining to the sale of the company.
A decedent’s estate consisted of minority ownership interests in three privately held C-Corporations, each holding a combination of real estate and marketable securities. In valuing the decedent’s interest in each company, the estate reduced the value of the underlying assets by discounts for minority interest, lack of marketability and built-in capital gains. The Internal Revenue Service (IRS) engaged MSG to value the three companies, assess the reasonableness of the discounts taken on the estate tax return, and provide testimony in tax court.
An operator of casual dining restaurants completed a recapitalization and ownership restructuring. Several months following the recapitalization, the company acquired another chain of casual dining restaurants being spun-off from a large publicly-traded food and beverage company. An additional round of equity and bank debt financed the acquisition. MSG was engaged to determine if the first recapitalization resulted in a change of control as determined under §382 of the Internal Revenue Code and to value the common stock and preferred stock of the combined entities following the acquisition.