Where Is the Excess Earnings Method Most Relevant?

The excess earnings method of valuation is the result of Appeals Revenue Memorandum 34, issued by the Internal Revenue Service. Its intended result was to separate the value of the tangible assets from the value of the intangible assets. Although created by the IRS, this method is rarely if ever used in tax valuations, however it is most often seen in valuations associated with matrimonial matters. In fact, many jurisdictions require this method, when valuing the business in a matrimonial matter.

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