Taxpayers should be aware and tax practitioners must know that Internal Revenue Service regulations for filing of estate and gift tax returns and charitable contributions involving business interests worth more than $5,000 require a qualified (business) appraisal by a qualified (business) appraiser. How do our friends at the IRS define these terms you ask? Please read on …
The IRS defines a qualified appraisal as an appraisal report that:
- is made, signed and dated by a qualified appraiser in accordance with generally accepted appraisal standards;
- meets the relevant requirements of IRC Regulations section 1.170A-13(c)(3) and Notice 2006-96, 2006-46 I.R.B. 902 (available at www.irs.gov/irb/2006-46_IRB/ar13.html);
- relates to an appraisal made not earlier than 60 days before the date of contribution of the appraised property;
- does not involve a prohibited appraisal fee; and
- includes specific information, such as a property description, terms of the sale agreement, appraiser identification information, date of valuation and valuation methods employed, among other requirements.
And the IRS defines a qualified appraiser as an individual who:
- Has earned an appraisal designation from a recognized professional appraisal organization (such as the ASA, NACVA, IBA, etc.) or has met certain minimum education and experience requirements
- Regularly prepares appraisals for which the individual is paid
- Demonstrates verifiable education and experience in valuing the type of property being appraised
- Has not been prohibited from practicing before the IRS under section 330(c) of Title 31 of the United States Code at any time during the three-year period ending on the date of the appraisal
- Is not an excluded individual (someone who is the donor or recipient of the property).
The IRS is serious about the quality and reliability of appraisals submitted with tax returns. Tax practitioners need to pay attention to the credentials and experience of the appraisers they select and understand the type appraisal reports that they obtain. When you need a business appraisal for a tax filing, our appraisers would be happy to discuss the appropriate scope of valuation analysis and report for your particular needs.