To Be or Not To Be a Qualified Opinion
The AICPA has established more rigorous provisions for accountants who may only occasionally opine values in SSVS-1. The bottom line: valuation should be performed by practitioners who are experienced and serving this niche market full time. Michael Gregory, an IRS Territory Engineer, told over 1400 attendees at the recent AICPA/ASA National Business Valuation conference in Las Vegas that the IRS is currently beefing up its team of engineers and appraisers; adding two territory managers in the West and two more in the East.
What about appraisers who may not be doing their jobs? The IRS continues to use the penalty provisions in IRC Sec. 6695A as a key enforcement tool to curb appraisal abuses. So far, the Service has asserted 146 penalties in the estate and gift arena, charitable deductions, conservation easements, and pension fund (ESOP). In his AICPA/ASA presentation, Gregory also offered suggestions on how to avoid the top 22 valuation-related missteps—including the valuator’s use of aged data, improper discount and cap rates, and inappropriate discounts for lack of marketability and minority interests. Overall, Gregory suggests making sure that the valuation conclusion passes the “common sense” test.
Property worth more than $5,000, other than publicly-traded securities, according to tax law, requires a "Qualified Appraisal". The appraisal must be done no earlier than 60 days before the property is gifted and no later than the due date of the tax return for the year of the gift, including extensions; is prepared, signed, and dated by a qualified appraiser; includes a statement that the appraisal was prepared for income tax purposes; and includes the appraised fair market value of the property on the date (or expected date) of contribution. Sec. 1.170A-13(c)(3)(i)(A), (B), (ii)(G), (I), (iv)(B), Income Tax Regs.
A “Qualified Appraiser” is an individual who includes on the appraisal summary a declaration that: The individual either holds himself or herself out to the public as an appraiser or performs appraisals regularly, the appraiser is qualified to make appraisals of the type of property being valued and the appraiser understands that an intentionally false or fraudulent overstatement of the value of the property described in the qualified appraisal or appraisal summary may subject the appraiser to a civil penalty under section 6701 for aiding and abetting an understatement of tax liability. Sec. 1.170A-13(c)(5)(i)(A), (B), (D), Income Tax Regs. An individual is not a qualified appraiser if the individual is the donor, the donee, any person employed by the donor or donee, or an appraiser who is regularly used by the donor or donee and who does not perform most of his or her appraisals for other persons. Sec. 1.170A13(c)(5)(iv)(A), (C), (D), (F), Income Tax Regs.
Carl L. Sheeler, PhD, CBA, AVA is the managing partner
of the nationwide business valuation, advisory and litigation support firm,
Allison Appraisals & Assessments, Inc. and has been conducting business
valuations full-time since 1992. Dr. Sheeler has provided litigation support
with national entities including Exxon, Ernest & Young, Bank of America, Amtrak
and American Honda as well as considered an authority on quantifying Discounts
for Lack of Marketability and Control. Designated an expert witness, he has
provided testimony in deposition as well as in Federal and State Courts on over
125 occasions. He has authored a plethora of articles and presented on the
valuation theory and practice for legal and finance journals in the US and the
PRC. He has been an instructor Of Great Distinction for NACVA.