How can tax accountants, wealth managers, M&A brokers, and business owners extract the most value from personal goodwill? Tax court decisions (Bross Trucking, Inc., T.C. Memo. 2014-107, and Estate of Adell, T.C. Memo. 2014-155) have demonstrated that sale of personal goodwill as a distinct asset, separate from corporate goodwill, can provide significant tax advantages for individuals. However, the decisions also illustrate the need for a robust set of justification for the value of personal goodwill in order to withstand challenges.
This presents both challenges and opportunities for wealth managers and their clients, as well as M&A brokers, to both quantify and qualify a portion of value attributed to the transfer of personal goodwill.
Leveraging over 20 years of experience analyzing and valuing intellectual assets, ipCapital Group has designed a service to fill this need - Enterprise and Personal Goodwill Valuation using an ipScan of Trade Secrets.
ipCapital Group performs a complete ipScan® in which trade secrets are extracted for use in a goodwill evaluation. During the ipScan®, ipCG facilitates the extraction of the client’s level of contribution to each idea documented. The sessions are audio recorded and accordingly transcribed.
ipCapital group then selects a number of these ideas which each rise to the level of a trade secret. A database containing titles and abstracts for each of these ideas is then produced. In determining the client’s impact on each of these trade secrets, criteria to determine the source of the secret are utilized to correctly apportion the client’s impact on each trade secret. Moreover, each trade secret is categorized based on the value of the trade secret. A complete registry of the trade secrets contributed by an individual provides compelling evidence for considerable personal goodwill value.
Utilizing this deep understand of the individual’s contribution, ipCG creates a pro forma valuation model to estimate the value of the trade secrets in terms of Enterprise/Personal Goodwill. The results of the ipScan are used as qualitative justification for quantitative results of the valuation model.
ipCG has detailed the development of this methodology and the value it has captured for clients in a forthcoming whitepaper, titled: Personal Goodwill Valuation - Methods That Leverage “Systematic Intellectual Property Extraction”.