In light of IRS audits and litigation risk, Badruswamy of Accuserve suggests problem with expert testimony if using foreign appraiser.
"One of the main issues with working in an outsourced manner is the lack of an expert that can be relied upon as expert testimony in such cases. As we all know, the IRS imposes penalties if the tax liabilities have not been measured under a fair market value standard under the 409A regulations. Given the size of IRS penalties and the nature of add-on penalties, it is important to work with US based firms that have a good understanding of the legal systems here, an understanding of what it takes to be an expert witness and have solid relationships with audit firms. We have been concerned a bit by the outsourced model, where foreign analysts compute and calculate the valuations with no experts out here to back such values."
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