IRS admits Kohler was a ‘learning experience’

BVWireIssue #58-3
July 25, 2007

At the American Society of Appraiser’s 2007 International Conference in Hollywood this month, the IRS’s Chuck Morris, JD, admitted the Service took away several insights from last summer’s landmark Kohler case. (See BVWire™ # 49-1 , which includes a link to the abstract of Kohler v. Commissioner, originally published in the Sept. 2006 Business Valuation Update™.) 

In particular, the case was “a lesson to the Service as to whom we hire as an expert,” Morris said, referring to the IRS’s decision to retain an expert without specific BV accreditation or membership in the ASA or Appraisal Foundation.  (Its expert was/is a chartered financial analyst and a Ph.D., who has enjoyed success in other valuation contexts and cases, most recently as the Service’s reasonable compensation expert in Wechsler v. Comm’r (2006), [case abstract also available to subscribers of the BVU].)

The Service is listening to input from appraisal organizations and their members, according to Brenda Woolbert, its Team Manager for Engineers and Appraisers, who co-presented the “Update on Appraiser Penalties and the Valuation Process” at the ASA’s day-long BV track.  The IRS website will soon have a specific link for the BV professional, to let you know “how you should do your work,” Woolbert said—(who, like Morris, was voicing her own opinions as opposed to those of the IRS).  Current outreach efforts will focus on strengthening IRS partnerships with appraisal societies and developing meaningful standards of conduct, oversight, and sanctions.   And look forward to greater presence by IRS appraisers at future conferences.

As a reminder, copies of the actual valuation reports used by all three experts in the Kohler case (two for the taxpayer, one for to the IRS) are available to subscribers of BVPapers.

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