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Multidisciplinary Alternative Investment Valuation and Financial Advisory Firm Transparently Serving the Full Range of Asset Managers, CFOs, CPAs, and Attorneys TM

NAV Valuation & Advisory LLC - Alternative Investment Valuation & Financial Advisory Firm

Cutting-Edge Alternative Investment Valuation and Financial Advisory Firm Transparently Serving the Full Range of Asset Managers, Attorneys, CFOs, and CPAsTM

View the 1-minute Firm Overview Introduction

Justin Kuczmarski,
MBA, CPA, CVA, CIRA, ABV
President

Tax Valuations: 83b IRS Valuation - Phantom Income

IRS Section 83b business enterprise valuations are rooted in this detailed section within the Internal Revenue Code.

For many new or fast-growing alternative investment funds, NAV values restricted stock grants. Restricted stock grants pose a challenge as the issue of phantom income arises when a fund or company matures and the non-vested restricted shares are accordingly worth more due to this growth and corresponding value appreciation. The IRS seeks to tax this income from appreciation irrespective of whether distributions are made. The taxation burden without actual distributions creates the concept of "phantom income".

Restricted shares are often provided to owners / investors for the performance of services. Simply put, taxable phantom income arises since Section 83b stipulates the receipt of restricted stock for services is considered taxable income when the stock vests. The IRS has stated that an independent valuation provides safe harbor penalty protection against tax penalties should the IRS ever successfully challenge and overturn the Section 83b valuation.

We encourage our clients to document an arm's-length valuation, and our NAV team specializes in Section 83b assignments for our range of small and medium-sized corporate clients. 

How We Assist Clients

 

NAV's team deliver cost-effective and supportable valuation services. Section 83b assignments are often performed for growing firms issuing extensive restricted stock. Equity compensation is a leading form of employee compensation and retention for firms in the fund, technology, Internet, or healthcare industries. A large percentage of our 83b client base accordingly operates within the aforementioned industries.

 

How We Are Transparent

 

We strive to deliver financial advisory blending diverse expertise and proven M&A records. Please reach out for more information on our full-range of tax valuation advisory services.