The IRS recently threw down the gauntlet and placed pressure on private companies to get their valuations right at no matter what stage of development they are. The Service has backed up this gesture by exposing private companies to substantial tax liabilities and penalties if they do not.

Since the enactment of Section 409(A), non-public companies have struggled with how they should establish that the exercise price of a stock option or a stock appreciation right (SAR) was determined reasonably to be fair market value. Up to this point, most private companies did not worry about valuing their stock very often, if at all. Private company valuations were needed usually for an imminent transaction, for an ESOP, or for estate and gift tax purposes. One could also throw in serious IPO candidates who obtain a valuation to avoid a “cheap stock” issue with the SEC.

Many private companies do not qualify for any of these scenarios; therefore they have not needed valuations in the past. As a result, companies and management that issue stock options could be somewhat unenthusiastic about this development. However, although a valuation in this situation can appear fairly cumbersome and superfluous, it’s not all bad – just ask auditors.

Auditors have expressed a desire for this to be done for years. They are cognizant of this development because valuing stock options is a financial reporting issue under FAS 123 and they want to know how a private company established the strike price of its options. There is some liability risk attributed to auditors when they sign off on this standard, and a professional valuation provides them with a level of reasonableness and reassurance that they desire. Considering this, there is a potential for tax and financial reporting synergy here.

With a good valuation report on hand, both issues could be satisfied simultaneously – two birds with one stone if you will. First, let’s examine the code and regulations driving this change.

Say Hello to the Culprits: IRC Section 409A requires private companies which award stock options that have exercise prices below fair market value to withhold income taxes on these grants. Significant penalties on non-complying option grants have placed private or closely held companies under increased pressure to be able to support and defend the fair market value determinations.

FASB 123, Accounting for Stock-Based Compensation, provides alternative methods of transition for a voluntary change to the fair value method of accounting for stock-based employee compensation. FASB 15X (Working Draft – issued October 21, 2005), Fair Value Measurements, established a framework for measuring fair value under a wide variety of accounting pronouncements that require fair value measurements.

In developing FASB 15X, the Financial Accounting Standards Board considered the need for increased consistency and comparability in estimates of fair value and enhanced disclosures about the estimates.

In most cases, when company management determines value and option pricing using an informal, internally generated valuation, the tax burden will be on the company to prove to the IRS that the fair market value of the equity is reasonable. In light of the recent regulatory changes announced over the past year, many private companies are proactively adopting one of the “presumptive” stock valuation methods set forth in the proposed regulations.

Procuring a qualified independent appraisal will cause the burden of proof to shift to the IRS and may only be rebutted by the IRS if the application of the method is found to be grossly unreasonable.

Neil Lemons represents Dallas-based Erickson Partners, LLC, who have provided independent, accurate, defensible opinions, “http://www.ericksonpartnersllc.com”> business valuations & appraisals
for over 30 years. For more information, check out http://www.ericksonpartnersllc.com.

Refinances are down, new home sales are off, lenders are closing their doors, loan programs are being eliminated, and credit requirements are being tightened…it’s no wonder we’re not quite as optimistic as we once were.

It’s against this backdrop that your on-line mortgage presence and Internet marketing takes on a whole new importance. There is mounting evidence that if you are not on the Internet bandwagon and if you can’t be found by people searching for mortgages on the Internet, you are completely “missing the boat” in the mortgage business.

Many of you have told me “I just don’t get that involved with online marketing. I’ve been very successful the traditional way for many years.” Here’s my response…My sincere congratulations on all of your past success and my profound empathy for the frustration you will suffer in the months and years ahead as your prospects leave you at the station while they board the express mortgage train called the internet.

Here are a few points about this trend to the Internet that you should ponder:

Both Search Engines and web sites are considered “referrals” and “trusted sources” by those doing the search. Being directed to your web site by organic search engines is a valid referral, just as a phone call is, or a referral from a friend or associate. People consult Google, Yahoo, MSN and AOL with inquiries and their most delicate questions over a billion times a week! If Internet referrals constitute a “trusted source,” shouldn’t you be one of those “trusted sources?”

The Internet is alive and on duty 24/7, and you would be amazed at what time of day (or night) people search for homes and mortgages. In contrast, the morning newspaper is usually in the trash by dinner time.

Supporting the proposition that newspaper readership and advertising is not as important as it used to be, consider these facts: In every age group, newspaper readership is down. In the 30-45 age group, less than 35% of people read a newspaper. Even in the 45-55 age group, only slightly more than 45% of people read the newspaper. People are turning to the Internet in staggering numbers.

Many publications including the New York Times are transitioning as fast as they can to Internet publication and advertising as they fear for the future of traditional newspapers in America.

Have you tried to get a teenager to read a book, lately? They are probably too busy Instant messaging, text messaging friends on their cell phones or watching videos on YouTube. Our next generation will be even less paper friendly and even more Internet friendly.

Mortgage professionals that have already committed to online marketing have been able to expand their marketing area and remain effective due to online communication; people find you on the Internet, call you or email you, and use you to help them secure a mortgage in an area they may not know.

So, unless you are in a state of denial about the Internet’s importance to your future mortgage transactions, you need to take action immediately.

You do need the Internet…today and in the future…to succeed in the mortgage business. If you are welcoming and ready to exploit the changes you need to make, you’ll be more successful in your online mortgage marketing and that’s where the money will be in the future!

Tom Domin is the author of “101 Ways to Originate Mortgages” and publisher of “Tom’s Mortgage Tips” a twice monthly Mortgage Newsletter geared for Mortgage Professionals. Increase your pipeline and put your mortgage career on the fast track and sign-up for FREE at http://www.MortgageMarketingToolKit.com.

Everyone has been hearing about the Online Traffic Formula, but not getting much information about it. I personally spoke to the man behind Online Traffic Formula to gain a better insight on this anticipated product.

Online Traffic Formula is a quality information product produced by Jason Pearson. It covers a wide range of “how to’s” for internet marketing and sending quality traffic to any website. In addition, it goes over how to organize, operate, and market your business whether online or offline. Don’t forget, this is a full home study course, not some $47 ebook with resell rights.

Now the great thing is, Jason over delivers with this program. He doesn’t stop at sending you a physically shipped product; Jason gives his students access to a special members only website where they can watch camtasia videos to see step by step how Jason implements his surefire marketing strategies.

So a special members area is awesome. But there is another bonus that Jason Pearson has included for his Online Traffic Formula customers. A one on one strategy call with an Online Traffic Formula expert. That phone call will allow the customer to ask any questions he or she may have and gain expert advice toward their concerns.

Fantastic, we’ve got the basics down on purchasing into the Online Traffic Formula home study course. But there is still something I must tell you that will excite you, so hold tight to your chair. As for being an Online Traffic Formula student, Jason gives you the option to buy seats to his live Online Traffic Formula bootcamp where you can learn directly from Jason himself and ask any questions you may have for him. It would be an intense three day seminar that you wouldn’t want to miss.

Now to top it all off, Jason Pearson added one more element to the Online Traffic Formula so that his students can benefit from it to the fullest. Jason included an affiliate program to the Online Traffic Formula so that the students can resell the product and get paid handsomely for it. Students can make commissions from the home study course and the exclusive bootcamp offer. With this affiliate program integrated, members will have a plug and play business set up and ready to go.

On the contrary, Jason also notified me about the launch of Online Traffic Formula. He predicted that it would be launched for March 6th, 2008 according to the way he currently is developing it, but the date of launch may be sooner or later.

Based on the overview of this article regarding the Online Traffic Formula, it seems like many of us are in for a good deal with Jason’s product. Jason has truly over delivered, again. The only thing left is to wait for its release and to capitalize on the given knowledge. I hope this has helped you learn more on what the Online Traffic Formula has to offer and encourages you to consider it so that you can prosper and be successful.

Jimmy Torres is a top student of Jason Pearson, the creator of Online Traffic Formula. For additional information about Online Traffic Formula, please visit Jimmy’s Online Traffic Formula site.