Morningstar Will Now Call Out Lackluster Private Investments
Morningstar Inc. has been rating stock and bond funds for everyday investors for years. Now it will award gold, silver and bronze medals to less-liquid private asset funds marketed to the masses.
The data firm will apply a Medalist Rating system to the booming market of semi-liquid funds that can hold private credit and equity, real estate and infrastructure assets, the firm said Tuesday in a statement. The rankings, slated to start in the third quarter, will shed light on funds that typically charge steeper fees in exchange for potentially higher returns.
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Forbes
31 minutes ago
- Forbes
Jones Day Argues New Approach To Valuation In Recent Tax Court Cases
Atlanta, Georgia, Jones Day, multinational law firm office building. (Photo by: Jeffrey ... More Greenberg/Universal Images Group via Getty Images) Tax Court Judge Goeke's opinion in Beaverdam Creek Holdings LLC pairs nicely with Judge Lauber's opinion in Ranch Springs LLC, which I recently covered. Both involve syndicated conservation easements on mining property in the South (Georgia and Alabama respectively) and extensive discussion of the discounted cash flow method of valuation. Another thing they have in common is the law firm representing the petitioner - Jones Day - and an innovative approach to valuation that they have developed and once again failed to sell a Tax Court judge on. Charles E. Hodges II of Jones Day has written me that both cases will be appealed. Most significantly both cases present a theory of valuation that would be game changing if it prevails on appeal. The property in question was an 85 acre tract in Oglethorpe County Georgia. It was owned by Service Granite Co. Inc (SGC) which had mined granite on it till 2006. It then leased the mine to Lexington Blue Granite Inc. Lexington, which had some ownership in common with SGC stopped mining sometime in 2008. North Ridge Quarries took up a lease and operated from 2008 to 2012. SGC ended up being owned by Lita Miller, who had no experience in the granite business. She was troubled by loans that were associated with SGC. In 2017, she heard from Lee Ellis of Strategic Seek One LLC expressing interest in the property. Mr. Ellis had identified the property from studying aerial maps. Ultimately they agreed on an effective purchase price of $225,000. Beaverdam was formed on June 29, 2017 with SSO as its manager. SGC contributed the property to Beaverdam in exchange for a 99% interest. SSO contributed $10,000 for a 1% interest. SSO agreed to pay SGC $228,000 for a 97% interest in Beaverdam leaving SGC with 2%. My inference is that these maneuvers were to give Beaverdam a tack on the holding period of the property so that the contribution could be made in 2017. Beaverdam Creek Investors LLC (BC Investors) was formed on August 23, 2017. The manager of BC investors was Strategic Fund Managers (SFM). Its purpose was to invest in Beaverdam "ostensibly" to either hold for appreciation or contribute a conservation easement. There were 183 units at $25,000 each for a total of $4,575,000. $950,000 of that was designated to be paid for the 97% interest in Beaverdam and $2,260,000 would be contributed to Beaverdam and $150,000 to a BC investors operating reserve. The balance went to offering expenses, consulting fees to Strategic Group and legal and other expenses. On December 27, 2017, SFM notified the partners that it had determined that the conservation strategy should be followed. The members had one day to affirm or reject the determination. Of those who voted 57 went for conservation and 2 for holding for investment. On December 28, 2017 Beaverdam conveyed an easement on the property to Foothills Land Conservancy. On its return for the short period December 28, 2017 to December 31, 2017 Beaverdam claimed a charitable contribution of $21,972,000 for the easement. The opinion includes a discussion of burden of proof and whether the appraisal was a qualified appraisal. The burden of proof did not shift from the taxpayer and the appraisal whatever its flaws was a qualified appraisal. The contentious important issue was valuation. Since you generally can't find a lot of buying and selling of easements the valuation is usually done by the before and after method. The value of the property before the easement encumbers it has the value of the property as encumbered subtracted from it. Usually it is the "before" value that is at issue. In this case, both parties agreed that the after value was $106,750. When it came to the before value Judge Goeke agreed with the taxpayer that the highest and best use was granite mining. "We agree with BC Investors that operation of a quarry on the easement property was financially feasible in December 2017. Although many of respondent's points are fair, the facts favor BC Investors' position. We are especially persuaded by the long history of quarrying that has taken place on the property, the property's lack of use for other purposes, and Mr. Krasinski's agreement with BC Investors' position." For the before value the IRS argued $215,000 and the taxpayer was looking for at least $23 million. Judge Goeke was not satisfied with either of those answers. He did not, however, split the difference. When it came to method, IRS was looking at comparable sales, but he did not think the IRS experts included enough information regarding quarry/granite features of the comparable properties. BC Investors argued that "the income method is the sole valuation method that can determine the fair market value of what Beaverdam Holdings sacrificed: the valuable granite that could be extracted and sold". Judge Goeke' overall assessment was harsh: "While we do not completely agree with respondent's position, it is not unreasonable. On the other hand, BC Investors' position is absurd". He goes on "... because the valuation BC Investors argues for is completely untethered from reality, it produced no sales data that remotely supports its DCF analyses. BC Investors asks us to trust speculative, unconvincing business valuation projections over the accumulated knowledge of the market in the 'Granite Capital of the World'." "BC Investors erroneously equated the (overstated) value of a hypothetical business to the fair market value of the easement property. Respondent advocated use of the comparable sales method, but his experts could have included more information regarding quarry/granite features in their comparable sales data. Considering the evidence, we value the easement property on the basis of our own examination of the record." Judge Goeke's examination of the record yielded a before value of $300,000. Subtracting the agreed after value makes for a deduction of $193,250. He also ruled that the 40% gross valuation penalty applied. The allowed deduction was about 1% of the claimed deduction of $21,972,000. When I first heard from people who were planning to syndicate conservation easements, I thought the idea was absurd. If they were going out buying property, they would generally be paying fair market value more or less and an easement is worth a fraction, possibly a large fraction, of the fair market value. The argument that was subsequently made by the industry was that an easement was giving up future value that might not be reflected in what the property would change hands for currently. Until recently, though, as far as I can tell, nobody was making any argument of that sort in court. That is what makes this case and Ranch Springs LLC so special. Jones Day was making an argument that would account for property being valued for a conservation easement at a multiple of the value that it had recently changed hands for. If you want to dive deeply into this here are two sources. One is an article in Bloomberg Tax - The Tax Tail Can't Wag The Valuation Dog: Five Key FMV Rules. Mr. Hodges is the lead author. The other is the Jones Day brief in the case. The argument is that in order for a sale to be comparable, you have to consider not only the physical characteristics of the property, but also the bargaining posture of the seller and buyer. They use the acronym BATNA (best alternative to a negotiated agreement) to describe the bargaining position. Beaverdam's BATNA was operating a quarry for a present value of $23 million. Lita Miller who let go of the property for less than 1% of that was not in a position to operate quarry so that sale was not comparable. Similar reasoning is applied to the other sales, the IRS put forth as comparable. In the Tax Tail Can't Wag The Valuation Dog article, the authors discuss the concept of "fair" in "fair market value". They argue that to be fair, both the hypothetical buyer and seller must be participants in each of the markets in which the property could trade. "Take for example, real property that could be put to use as either farmland (a less valuable use in this hypothetical) or commercial real estate (a more valuable use) and the seller is a farmer and buyer is a developer. The farmer may lack the experience and capital, or otherwise, to exploit that potential commercial use. Thus the farmer - with limited development knowledge and unable to commercially develop the property himself - may accept a price that is indicative of the property's continued use as a farm, or a reduced value because of his inability to commercially develop the property. In this hypothetical, the price at which the property changed hands does not represent a "fair" approximation of the value of the property." The implications of this approach are breathtaking. Comparable sales are a preferred valuation method, but if Jones Day is right in Beaverdam and Ranch, comparable sales may be very rare. Neither of the Tax Court judges who engaged with this is impressed by the theory, but I am impressed that Jones Day managed to come up with anything that supports the easement syndication industry's view of the world. I am looking forward to see what the appellate court makes of it. Mr. Hodges wrote me that as he sees it the Tax Court with its ruling that discounted cash flow is valuing a business rather than the underlying land has effectively eliminated the highest and best use inquiry.
Yahoo
41 minutes ago
- Yahoo
Trump Raked in $57.3 Million From Crypto Venture, Per White House Financial Disclosures
President Donald Trump earned money in 2024 from a variety of sources, including luxury properties and royalty payments and licensing earnings for the use of his name and likeness last year, and big bucks from his crypto venture with World Liberty Financial, to the tune of more than $57 million, according to the required Executive Branch Personnel Public Financial Disclosure report filed on June 13. Trump debuted the cryptocurrency platform World Liberty Financial in September, and it's a family affair: it's controlled by his sons Donald Trump Jr. and Eric Trump and Trump's 18-year-old son Barron is the project's 'DeFi visionary,' as CBS News reports. Its leadership also includes Zach Witkoff, the son of Trump's Middle East envoy Steve Witkoff. The venture is one of his largest sources of income in the 234-page document for calendar year 2024, noted on page 171, with token sales raking in more than $57.3 million for WLF Holdco LLC, for which he holds 75 percent ownership via entity DT Marks Defi LLC. Trump's $TRUMP cryptocurrency token, which reached the billions on paper a couple of days before inauguration day, was not included in the form since it was released this year. Less than 24 hours before he was inaugurated, $MELANIA meme coins for First Lady Melania Trump also arrived, all of which has brought into focus ethics questions. Last month, Trump held a dinner party for the 220 top holders of $TRUMP. Meanwhile, the GENIUS Act, which includes a controversial piece of cryptocurrency legislation that the Senate is set to pass next week, could 'create a superhighway for Donald Trump's corruption,' Sen. Elizabeth Warren (D-Mass.) told Rolling Stone ahead of key votes. The GENIUS Act would permit banks and private companies to issue stablecoins, with minimal regulatory oversight. Trump's WLF venture recently launched USD1 stablecoin, which is pegged to the U.S. dollar and backed by treasury bonds. The financial disclosure report also showed Trump's estate and member's only club Mar-a-Lago in Palm Beach, Florida generated more than $50 million in 2024 and he earned $15 million in license fees from a Dubai property. He earned $3 million in royalty payments for coffee table book, Save America. Other big royalty generators include $2.5 million from Trump sneakers and fragrances; Trump's 'God Bless America' Bibles, which were printed in China, yielded $1.3 million; and $1 million came from Trump Guitars. The report included liabilities disclosures as well, listing more than $50 million in litigation involving E. Jean Carroll, the former magazine columnist who sued for sexual abuse and defamation, and separately for sexual assault and defamation, and won both cases. More from Rolling Stone Thousands of 'No Kings' Protests Held Against Trump's 'Militarized Birthday Party' ICE Will Pause Farm, Restaurant Raids After Trump Social Media Post Democratic Lawmaker Killed in Apparent 'Politically Motivated Assassination' Best of Rolling Stone The Useful Idiots New Guide to the Most Stoned Moments of the 2020 Presidential Campaign Anatomy of a Fake News Scandal The Radical Crusade of Mike Pence Errore nel recupero dei dati Effettua l'accesso per consultare il tuo portafoglio Errore nel recupero dei dati Errore nel recupero dei dati Errore nel recupero dei dati Errore nel recupero dei dati
Yahoo
an hour ago
- Yahoo
5 Most Expensive Teslas — Can You Afford One?
Now that Tesla's CEO, and richest man in the world, Elon Musk, has left his White House duties and is once again refocusing on the finances of his car company, it's interesting to see just what his favorite income earner charges consumers. Teslas are many things, but one thing they are not is cheap. Read Next: Find Out: These cars offer some of the most innovative technology available to drivers today — that is, if they have the money to afford them. Here are some of the most expensive Teslas and what it could cost you monthly to buy one. 2025 Starting MSRP: $81,630 to $91,630 Estimated average monthly payment: $1,148 The Model S from Tesla has a lot to boast about, including a base dual motor which can power the car from 0 to 60 miles per hour in 3.1 seconds, as well as go for a 405-mile range. However, the price point is equal to that of the company's Model S Long Range, which was more than $88,000 back in 2023. It's a powerful electric vehicle that requires a bit of green to get behind the driver's seat. Discover More: 2025 Starting MSRP: $81,630 to $96,630 Estimated average monthly payment: $1,299 While it was originally priced at about $140,000 in 2023, the Model X Plaid has come down in terms of cost, but not in features. It has the same tri-motor AWD set up as the Model S Plaid while offering a roomy interior for up to six riders. While it's heavier than the average SUV and not as aerodynamic as other cars, it has a range of 326 miles and can go from 0 to 60 miles per hour in 2.5 seconds, which is why drivers pay top dollar to own one. 2025 Starting MSRP: $81,985 Estimated average monthly payment: $1,209 Love 'em or hate 'em, the Cybertruck is out on the road and for a pretty penny, too. The Cybertruck provides an up to 340-mile range, 600 horsepower, an estimated 340-mile range and 11,000 pounds of towing capabilities. After numerous production delays, Tesla's founder, Elon Musk, tried to make the Cybertruck $30,000 cheaper, but despite not being able to reach that price, thousands of drivers are currently behind the wheel of these EVs. 2025 Starting MSRP: $101,985 Estimated average monthly payment: $1,766 If you want the Cybertruck souped up, you will have to order the Cyberbeast. Deliveries tend to take about a year, making it the most expensive Tesla that one can find in the catalogue. It can still tow up to 11,000 pounds, as well as get a top speed of 130 with 845 horsepower and go for a range of about 320 miles. What you end up paying for is the power of the Cyberbeast. 2026 Starting MSRP: $200,000 to $250,000 Estimated average monthly payment: Could be upwards of $4,000 over five years One of the brand's original models got a significant upgrade with the New Tesla Roadster, a car that reigns as Tesla's most expensive vehicle to date — if it gets released, which would be in 2026 at the earliest. In order to simply reserve it, drivers need to put down $50,000 and then come up with the average starting price of about $200,000, with a Founders Series model specially priced for an estimated $250,000 total. If you are looking to get behind the wheel of one, start saving your pennies now. Caitlyn Moorhead contributed to the reporting for this article. More From GOBankingRates 3 Luxury SUVs That Will Have Massive Price Drops in Summer 2025 5 Cities You Need To Consider If You're Retiring in 2025 Mark Cuban Tells Americans To Stock Up on Consumables as Trump's Tariffs Hit -- Here's What To Buy This article originally appeared on 5 Most Expensive Teslas — Can You Afford One? Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
