Revenue Ruling 59-60

The IRS Guidelines for Valuations Conducted for Estate & Gift Tax Purposes, Income Tax Matters Concerning the IRS, and Shareholder Agreements

As delineated by Revenue Ruling 59-60, in accordance to Sections 2031, 2032 and 2512, of the Internal Revenue Code, a business valued for estate and gift tax purposes must be based on the standard of Fair Market Value, willing seller/willing buyer. This is also true for shareholder agreements and income tax matters concerning the IRS.

Revenue-Ruling 59-60 considers eight basic factors when valuing a closely-held entity including, but not limited to:

  • The nature of the business and the history of the company.
  • The general economic outlook and the condition and outlook of the particular industry.
  • The book value of the stock and the financial condition of the business.
  • The earnings capacity of the business.
  • The dividend-paying capacity.
  • Whether the business has goodwill or intangible value.
  • Stock sales and size of the stock to be valued.

The stocks market price of comparable corporations publicly traded and engaged in the same or similar line of business.