Problem 19-29 (Algorithmic) (LO. 3) At her death, Chow owned 55% of the stock in Finch Corporation, with the balance held by family members. In the past five years, Finch has earned average net profits of $1,950,000, and on the date of Chow's death, the book value of its stock is $4,875,000. An appropriate rate of return for Finch's business is in is 6.95%. If required, round your intermediate computations to the nearest dollar. a. If goodwill exists, the total value of Finch stock is What value would the IRS argue that the stock Chow owned should be included in her estate? b. Considering the facts given, identify some factors that could be present to reduce the value of such goodwill by selecting "Yes" for ones that can impact a goodwill valuation and "No" for ones that won't. 1. Extraordinary gains. 2. Lower than industry average salaries. 3. Chow was the key person in the success of the business. 4. The appropriate rate of return for this type of business is low.
Problem 19-29 (Algorithmic) (LO. 3) At her death, Chow owned 55% of the stock in Finch Corporation, with the balance held by family members. In the past five years, Finch has earned average net profits of $1,950,000, and on the date of Chow's death, the book value of its stock is $4,875,000. An appropriate rate of return for Finch's business is in is 6.95%. If required, round your intermediate computations to the nearest dollar. a. If goodwill exists, the total value of Finch stock is What value would the IRS argue that the stock Chow owned should be included in her estate? b. Considering the facts given, identify some factors that could be present to reduce the value of such goodwill by selecting "Yes" for ones that can impact a goodwill valuation and "No" for ones that won't. 1. Extraordinary gains. 2. Lower than industry average salaries. 3. Chow was the key person in the success of the business. 4. The appropriate rate of return for this type of business is low.
Chapter19: Family Tax Planning
Section: Chapter Questions
Problem 30P
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Transcribed Image Text:Problem 19-29 (Algorithmic) (LO. 3)
At her death, Chow owned 55% of the stock in Finch Corporation, with the balance held by family members. In the past five years, Finch
has earned average net profits of $1,950,000, and on the date of Chow's death, the book value of its stock is $4,875,000. An appropriate
rate of return for Finch's business is in is 6.95%.
If required, round your intermediate computations to the nearest dollar.
a. If goodwill exists, the total value of Finch stock is $
What value would the IRS argue that the stock Chow owned should be included in her estate?
b. Considering the facts given, identify some factors that could be present to reduce the value of such goodwill by selecting "Yes" for ones
that can impact a goodwill valuation and "No" for ones that won't.
1. Extraordinary gains.
2. Lower than industry average salaries.
3.
Chow was the key person in the success of the business,
4.
The appropriate rate of return for this type of business is low.
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