Revenue Ruling 59-60 and its eight factors
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Quick Answer
Revenue Ruling 59-60 sets out eight factors for determining the fair market value of stock in a closely held corporation.1
What it is
They are the nature and history of the business; the economic outlook generally and for the industry; book value and financial condition; earning capacity; dividend-paying capacity; goodwill or other intangible value; sales of the stock and the size of the block being valued; and the market price of comparable publicly traded stocks. It is a weighing framework, not a formula.1
Operational context
What good looks like
Why It Matters
It remains the reference point for private-company fair market value arguments, and an appraisal that does not address each factor gives the IRS a straightforward basis on which to reject it.1
Term Family
Related concepts
Frequently Asked Questions
What is Revenue Ruling 59-60 and its eight factors in venture capital?
They are the nature and history of the business; the economic outlook generally and for the industry; book value and financial condition; earning capacity; dividend-paying capacity; goodwill or other intangible value; sales of the stock and the size of the block being valued; and the market price...
Why is Revenue Ruling 59-60 and its eight factors important for startups?
Understanding Revenue Ruling 59-60 and its eight factors is critical for founders navigating the fundraising process. It directly impacts deal terms, valuation, and the relationship between founders and investors.
Sources & References
- 1.T1-11 — Internal Revenue ServiceRevenue Ruling 59-60Internal Revenue Service(Revenue Ruling 59-60 sets out eight factors for determining the fair market value of stock in a closely held corporation.)primary · T1 · valuation · rule
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