Valuation · June 2026
Rev. Rul. 59-60: the 8 Factors and How to Document Each
Revenue Ruling 59-60 is still the backbone of closely-held business valuation. It was written for estate and gift tax, but its eight factors capture what any willing buyer and seller actually weigh — so courts and reviewers expect to see each one addressed. Here’s what each factor means and how to document it so your conclusion holds up.
1. Nature and history of the business
Describe what the company does, how it makes money, and how it has evolved — including stability, diversity, and any events that make the history more or less representative of the future.
2. Economic outlook and industry condition
Tie the valuation date to the broader economy and the specific industry. Cite real data for the period; explain how conditions affect risk and growth expectations.
3. Book value and financial condition
Analyze the balance sheet — liquidity, leverage, asset quality — and reconcile book value to economic reality (e.g., FMV adjustments) where the asset approach is relevant.
4. Earning capacity
The heart of most engagements. Normalize historical earnings, weight the periods you rely on, and explain the capitalization or discount rate that converts earnings into value.
5. Dividend-paying capacity
Focus on capacity, not actual distributions — owners can suppress dividends. Document what the company could sustainably pay, which informs minority-interest analysis.
6. Goodwill and other intangible value
Identify intangible value beyond net tangible assets (brand, customer relationships, assembled workforce) and show how your approach captures or excludes it.
7. Prior sales and size of the block
Consider arm's-length transactions in the stock and whether the block being valued conveys control. Size drives both the control premium/discount and marketability analysis.
8. Market price of comparable companies
Where a market approach applies, support your multiples with guideline public companies or transactions in the same or a similar line of business — and reconcile differences.
Tie it together
The factors aren’t a checklist to bury in an appendix — they are the narrative spine of the report. Address each one explicitly, note how it informs risk and growth, and reconcile it to the approach you weight most heavily. A reviewer should be able to trace every factor to its effect on value.
The Valuation Processor structures the report around Rev. Rul. 59-60 — so the analysis, the exhibits, and the conclusion stay aligned, and the documentation is built in rather than bolted on.
General guidance for valuation professionals, not valuation, legal, or tax advice. Apply professional judgment to each engagement.