Understanding the Importance of Your Personal Property Valuation

There are a fairly consistent set of reasons people require valuation of business personal property including:

• ➜ Accounting / depreciation
• ➜ Impairment of value
• ➜ Casualty loss
• ➜ Business valuation
• ➜ Business dissolution
• ➜ Divorce
• ➜ Estate taxes
• ➜ Property taxes

Appraisal districts value millions of business personal property accounts with a total staff estimated at 2,850. Two hundred twenty-eight personal property appraisers handle all the accounts in Texas. The number of personal property appraisers at appraisal districts in Texas was provided by the Texas Comptroller for 2015.

Regulatory Compliance and Income Taxes

Businesses need to account for the cost and depreciation allowed by the IRS for federal tax purposes. This is simply regulatory compliance and tax reduction (you don’t get the depreciation unless you track property not expensed). While this is included in chapter 3,“Why is Personal Property Valued?”, this is not value in the sense of developing an opinion of market value.

There are a series of elements to defining market value which we will discuss. However, the accounting calculations for depreciation have never been intended to be a reliable indication of market value by the IRS or business.

There is a surprising correlation between the

When is it Important to Know Your Personal Property Value?

When a business is sold, it is necessary to allocate the purchase price between tangible items that can be depreciated and those items, such as goodwill. Personal property valuation is necessary for valuing a business to determine an asking price and evaluate an offer. usiness dissolution requires understanding the market value of assets and liabilities. Divorces are often contentious. Market value differs from accounting value.

• ➤Estate taxes – appraisal may be worthwhile depending on estate size.
• ➤Property taxes – rules vary state to state on what is taxable.

Obtaining an independent fee appraisal or determining an accounting adjustment is the primary reasons for performing valuations.

Complexity of Intangible Property Valuation

Further, people are likely going to have differences of opinion on how to value the tangible versus intangible components of personal property today. Intangible personal property includes cash, patents, stocks, trademarks, software, proprietary processes, trade secrets, and more.