After the passage of the Pension Protection Act in 2006, which created a penalty for improper appraiser practices and qualifications, and then the Tax Technical Corrections Act of 2007, which extended the penalty for misstated appraisals to estate and gift taxes, the General Accounting Office (GAO) undertook a study to explore three primary objectives:
- The extent to which individual, estate, and gift tax returns are likely to involve an appraiser and the extent to which the IRS audits them;
- How the IRS selects returns likely to involve appraisals for compliance examinations; and
- Whether the IRS’s appraisal experts are qualified.
The GAO released its findings last week: "Appraised Values on Tax Returns: Burdens on Taxpayers Could Be Reduced and Selected Practices Improved." A summary review doesn’t indicate any earthshaking insights or guidance. In general, the report commends the IRS’s engineering group for maintaining high appraisal standards and skills among its staff, but says “gaps exist” in training for its art appraisal staff. Also, the GAO recommends raising the current $5,000 threshold at which taxpayers must obtain appraisals for noncash contributions to $10,000. “Appraisers play a large role in the amount of tax reported on estate returns, but have less pronounced effects on gift and individual tax returns,” the study concludes. “Although the IRS does not specifically target tax returns that involve appraisals, the policies and procedures that the IRS has in place (e.g., targeting high-income individuals) ensures some coverage of returns that do involve appraisals.”
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