Revenue Ruling 59-60: 8 Valuation Factors and Records
The ruling's eight familiar factors sit inside a longer request for date-specific facts, financial history, supporting schedules, and owner-manager evidence.
The records around the eight factors
Revenue Ruling 59-60 says a closely held-stock valuation depends on facts available at the required appraisal date. Its eight factors include company history, financial condition, earning capacity, intangible value, and comparable public companies. That source passage also asks for comparative balance sheets, explanatory schedules, and a representative profit-and-loss history.
Read those records with the factors. The ruling concerns federal estate and gift tax, so it does not supply a negotiated business-sale price. 1
On this page 6 sections
Revenue Ruling 59-60's appraisal-date requirement
Section 3.03 makes the required appraisal date the boundary for this reference: its statement about future value rests on facts available at that point, not on later results. 1
Put the date beside each balance sheet, profit-and-loss statement, forecast, comparable, and operating fact. Later information can explain what happened, but it was not available at the appraisal date. The ruling does not turn that sorting exercise into a company sale price. 1
As you review the file, mark documents that existed on the appraisal date and keep later events in a separate note, where they can explain subsequent performance without appearing as contemporaneous facts.
Comparative statements behind the 8 Revenue Ruling 59-60 factors
Section 4.01 calls for all available financial data and relevant factors. Its eight factors cover the company's history, the general and industry outlook, financial condition, earning capacity, dividend-paying capacity, intangible value, stock sales and block size, and comparable public-company prices. The ruling calls those factors fundamental but not exhaustive. 1
Alongside that list, the ruling asks for comparative annual balance sheets for two or more years and, when accounting permits, a balance sheet at the end of the month before the appraisal date. It asks for supporting schedules when a caption combines unlike assets or liabilities. Detailed profit-and-loss statements should cover a representative period, preferably five or more years. 1
That is why a bare factor list is hard to apply. Financial condition and earning capacity point back to statements, periods, and captions that can be inspected. For related context, visit the private-company valuation desk.
In a first pass, you can compare the available balance-sheet and profit-and-loss periods with the source request before treating the factors as a complete valuation file.
The ruling's factor list and financial-record request
The excerpt retains original wording and numbering because those words, rather than a summary alone, define the federal reference discussed here.
SEC. 4. FACTORS TO CONSIDER.
.01 It is advisable to emphasize that in the valuation of the stock of closely held corporations or the stock of corporations where market quotations are either lacking or too scarce to be recognized, all available financial data, as well as all relevant factors affecting the fair market value, should be considered. The following factors, although not all-inclusive are fundamental and require careful analysis in each case:
(a) The nature of the business and the history of the enterprise from its inception.
(b) The economic outlook in general and the condition and outlook of the specific industry in particular.
(c) The book value of the stock and the financial condition of the business.
(d) The earning capacity of the company.
(e) The dividend-paying capacity.
(f) Whether or not the enterprise has goodwill or other intangible value.
(g) Sales of the stock and the size of the block of stock to be valued.
(h) The market price of stocks of corporations engaged in the same or a similar line of business having their stocks actively traded in a free and open market, either on an exchange or over-the-counter.
Revenue Ruling 59-60 factors in a business valuation
Swipe to compare| Part of the ruling | Material named in the passage | Reading boundary |
|---|---|---|
| Required appraisal date | Date-labeled statements, forecasts, comparables, and operating facts | Later information was not available at the required appraisal date |
| Financial condition | Comparative balance sheets and supporting schedules | A combined caption can conceal unlike assets or liabilities |
| Earning and dividend capacity | Detailed profit-and-loss history for a representative period | The passage prefers five or more years and does not supply an arbitrary average |
| Owner-manager facts | Duties, successors, assets, insurance, and replacement-management cost | The source asks for risk and possible offsets to be weighed together |
Owner-manager risk, successors, and replacement cost
The ruling's discussion of a so-called one-man business goes beyond the manager's absence. It says the loss may affect future expectations when trained successors are lacking. It also names possible offsets: assets that would not be impaired, life insurance, and competent replacement management available for consideration. 1
The relevant record is therefore more specific than an owner title or an estimate of weekly hours. List the work the owner performs, the person who can carry each duty, the authority already in place, relevant insurance, and known replacement-management cost. The passage asks for those facts to be weighed together. 1
As you review those duties, match each one with a named successor, existing authority, or unanswered replacement question. The list is more useful than an owner-dependence label alone.
Why Revenue Ruling 59-60 does not set a sale price
Revenue Ruling 59-60 concerns closely held stock in federal estate and gift tax cases. Appendix A appears in an IRS valuation job aid whose notice says it does not state an official IRS position. The IRS valuation-resources page provides a current route to federal valuation materials. 12
A negotiated company sale poses a separate planning question, so compare the principal valuation approaches after assembling the date-specific facts. For an initial sale-planning range, read what a business is worth. For company-specific questions, the confidential valuation intake gives an owner a private starting point.
Common questions about Revenue Ruling 59-60
01Does Revenue Ruling 59-60 provide a business sale price?
No. It concerns federal estate- and gift-tax valuation of closely held stock. It says no generally applicable formula covers every case and gives neither a transaction multiple nor a negotiated company sale-price conclusion. 1
02Which financial statements does Revenue Ruling 59-60 name?
The selected passage asks for comparative annual balance sheets for two or more years, a balance sheet near the appraisal date when accounting permits, schedules for unclear captions, and detailed profit-and-loss statements for a representative period, preferably five or more years. 1
03What does the ruling say about an owner-run company?
It says the loss of a manager may affect future expectations when trained successors are absent. The ruling also names the nature of assets, life insurance, and available competent replacement management as possible offsetting facts. 1
IRS valuation materials used here2 sources
- Internal Revenue Service — S Corporation Valuation Job Aid for IRS Valuation Professionals Appendix A Revenue Ruling 59-60
Exact ruling text, valuation-date boundary, eight factors, requested financial records, and owner-manager discussion. Limit: The surrounding job aid says it is not an official IRS position. The reproduced ruling concerns federal estate and gift tax and provides no sale price. Accessed 2026-07-28.
- Internal Revenue Service — Valuation of assets
Current IRS valuation-resource context and retrieval path for federal valuation materials. Limit: The page does not convert the ruling into a transaction price, market multiple, or company-specific conclusion. Accessed 2026-07-28.
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