How do governments assess private companies for estate tax considering they are not bought and sold and thus the shares to not have a price?

Question

Based on an discussion i had with friends, if its a large private company, but one which is not valued by the market how does the government assess it for inheritance tax purposes? cant i just sell/assess the shares for 100 dollars total even if its worth 100 million?

In: Economics

Answer 1

There are businesses that value companies for purposes such as estate tax. It is not as simple as simply looking at the book value. Google “discounted cash flow analysis” to get a rough idea on how this can work.

For an “ELI5” answer, the company will be valued based on its assets and debts, in addition to giving consideration to how profitable the company is expected to be in the coming years.