Description
Archive 2022-170: Lost Profits for New Businesses and Neutralizing Lost Profits Damages for Tax Consequences
**Webinar 170: Live Broadcast Date: August 9, 2022, 1:00-3:00 pm EDT**
VPS StraightTalk Webinar Series: Two Part Presentation: Lost Profits for New Businesses and Neutralizing Lost Profits Damages for Tax Consequences
Speakers: David Duffus, Robert Gray, W. Ira Bowman, Ken Rugeti
Lost Profits for New Businesses
Estimating lost profits for new businesses, which have little or no historical financial data, can be challenging. But there is a way, even though the bar for reasonable certainty in proving lost profits can be a high hurdle to clear. This presentation provides a framework for determining if a business is “new” and discusses how the new business rule allows new businesses to claim lost profits, as long as they can be proven with reasonable certainty. The presentation includes specific examples of cases, legal doctrines, and methodologies that support the proof of recovery of damages.
Learning Objectives:
The participant will learn:
- Provide the practitioner with an understanding of the evolution of the “New Business Rule,” including the modern application of the concept
- Assist the practitioner in understanding a framework for evaluating whether a business may be considered a new business based on its stage of development
- Discuss the concept of reasonable certainty to enable the damages expert to understand how the concept is relevant to assessing lost profits damages for a new business
- Provide practitioners with an overview of analytical techniques for evaluating lost profits, and the challenges and difficulties in applying standard techniques (approaches/methodologies) to new businesses cases
- Orient experts to relevant cases and legal doctrines that address the recovery of lost profits damages for new businesses
Neutralizing Lost Profits Damages for Tax Consequences
Should lost profits damages claims be computed on a pre-tax basis? This approach, while simple, may fail to account for many tax determination and timing differences between the but-for lost profits damages period and the date of an assumed lump-sum damages award. This presentation will explore circumstances where tax neutralization adjustments are needed. It will also present a simplified foundation for performing tax neutralization in the computation of lost profits when the evidence—and more importantly, the court—permit this approach.
Learning Objectives:
The participant will be:
- Provided with an overview of the common before-tax approach to computing damages
- Assisted in understanding circumstances that may result in a plaintiff being made less than or more than whole after payment of income taxes on a damages award
- Presented with important considerations when contemplating tax neutralization analysis
- Provided with a simplified foundation for performing tax neutralization analysis
Handouts
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- Copy of the VPS webinar PowerPoint slides
- Access to a video recording of the program.
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