Business valuation experts often help formulate settlement offers in divorce cases. This article highlights provisions of the Tax Cuts and Jobs Act (TCJA) that could affect divorce settlements, including elimination of the deduction for alimony payments, restricted deductions for state and local taxes, expanded uses of Section 529 education plans and reductions in business tax rates. A sidebar defines alimony under the tax rules that will apply through 2018.
Future earnings drive business value under the income approach. This article compares and contrasts two methods that fall under this approach: the discounted cash flow and capitalization of earnings methods. A sidebar explains what terminal value is — and how to calculate it.