The IRS caused quite the alarm among business appraisers when it announced more than a year ago that it would allow IRS examiners and agents—even those without BV credentials—to issue Sec. 6695A penalty citations via a “Valuation Misstatement Letter,” what since became known as Letter 4477 (see BVWire #85-3). The BV professional community immediately responded, led by Jay Fishman (Financial Research Associates), member of the IRS Advisory Council and chair of the ASA’s Government Relations Committee, who secured a meeting with Service reps last February (BVWire #90-1). “We pointed out—yes, hold appraisers accountable,” Fishman said, while moderating the “IRS Valuation Managers Roundtable” at the recent BVR/Georgetown Advanced BV Summit. “But do it in a better way. Take the emotion out of the issue.”

The IRS listened to appraisers’ comments—and revised the notice requirements. Now the Service will make two phone calls to the subject appraiser before sending Letter 4477, which is now called an “Appraiser Appointment Letter,” said panelist Susan Kurzweil, IRS National BV Issue Coordinator. The letter will ask to set an appointment with the appraiser to discuss the matter—not to invoke a penalty citation. More importantly, an experienced IRS professional will be involved in the process, to review the work file and interview the appraiser “to get the full picture of the case and give the appraiser an opportunity” to respond, Kurzweil said.

More hot buttons and red flags: What aspect of an appraisal will flag the attention of an IRS examiner? What are the top-ten valuation mistakes the Service most often sees? Where will the Service focus its resources—and its increasingly credentialed agents? The IRS panel answered these and more hot-topic items during the Summit roundtable. Be sure to read the full report in the Jan. 2011 Business Valuation Update.