Estate & Gift Tax Valuations

Valuations of closely held business interests are essential for estate planning, gifting, estate settlement, and Internal Revenue Service (IRS) reporting of estate or gift transactions. The goal of estate tax planning is to provide liquidity and continuity of a business. A smooth and stable transition is paramount to maximize the business owner’s investment. Also, for high net worth individuals holding real property and marketable securities, a valuation is essential to preserve their assets for future generations.

Family limited partnerships (FLPs), limited liability companies (LLCs), and other types of entities have been a popular estate planning tool for years. Aside from the business purposes of such entities, such as centralized management and protection of assets from creditor claims, they also may offer tax advantages through valuation discounts. The most common discounts are for lack of control and lack of marketability. These discounts are derived from actual market evidence but must also be supported by the facts and circumstances unique to every entity. In order to minimize the possibility of an IRS challenge, a professionally prepared, well-substantiated valuation is essential.

The recognized standard of value in estate and gift tax valuations is fair market value.  This is defined as the theoretical amount at which the property would change hands between a willing buyer and a seller, where both parties have reasonable knowledge of the relevant facts. These valuations undergo intense scrutiny.  In order to minimize IRS challenges, a professionally prepared and well documented valuation is essential for various estate and gift tax valuations, including:

  • Whole or Fractional Ownership Interests in FLPs or LLCs
  • Whole or Fractional Ownership Interests in Real Estate, including Tenancy-in-Common Interests
  • Whole or Fractional Ownership Interests in Closely Held Businesses

We work with tax attorneys, accountants, and other estate planning professionals in their efforts to comply with client needs and IRS reporting requirements. Our appraisals are guided by applicable IRS code, rulings and precedent such as IRS Revenue Ruling 59-60. In addition we follow the highest standards in business valuation as promulgated by the American Society of Appraisers (ASA) and the Uniform Standards of Professional Appraisal Practice (USPAP). The result is an independent and professional opinion of value that can withstand scrutiny and challenge.