Which valuation method does Revenue Ruling 68-609 discuss?

Revenue Ruling 68-609 primarily discusses the Excess Earnings Method as a way to value certain types of intangible assets, particularly in the context of determining the value of a business for various purposes, including gift and estate taxation. This method is significant because it helps to capture the value attributable to intangible assets by identifying the excess earnings of a business above a normal return on its tangible assets.

In this ruling, the focus is on the calculation of the earnings generated by a business that cannot be attributed to its physical assets alone. The Excess Earnings Method starts with a determination of the earnings of the business, subtracts a fair return on the tangible assets, and considers the remaining earnings as attributable to the intangible assets. This allows for a more accurate reflection of a business's true value, especially in industries where intangibles play a significant role, such as service industries or high-tech companies.

The other methods mentioned, while valuable in their own contexts, do not align with the specifics of Revenue Ruling 68-609. Market comparables method relies on comparable transactions, net asset value focuses on the company’s assets minus liabilities, and price to earnings ratio is a valuation metric based on market price and earnings per share. Therefore, the Excess Earnings Method is rightly