The valuation of S corporations has been a hotly debated topic in the valuation community ever since the Gross case opened a Pandora's Box by disallowing tax affecting of an S corporation's earnings stream. This article examines a variety of positions taken on both sides of the argument and discusses issues that analysts should consider when valuing S corporations.

This article builds upon a presentation by James S. Rigby, Jr., James L. Williams and Mark O. Dietrich at the AICPA's National BV Conference in December of 2001, and on the chapter devoted to the Physician Practice Management Companies in Mr. Dietrich's Medical Practice Valuation Guidebook.