IRS clarifies 6695A ‘exceptional’ investigations

BVWireIssue #63-1
BVWireIssue #63-1
December 5, 2007

This special supplement to the BVWire™ includes a more complete statement by Brenda Woolbert, Team Manager for IRS engineers and appraisers, who spoke at the recent AICPA National BV Conference in New Orleans.  With regard to the extension of § 6695A penalties to estate and gift tax returns and the “exceptional” case when an investigation could proceed against appraisers without their ability to support their work at the examination level, Woolbert explains:

The exception to the 6695A penalty is based on a standard of ‘more likely than not’ the proper value.  As a practical matter, there exists the potential for IRS valuators to resolve valuation issues directly with the taxpayer and never discuss the valuation issues directly with the appraiser.  In some instances, a significant adjustment could result in the valuator referring the case for penalty investigation or directly to the Office of Professional Responsibility (OPR).  In such a case, the first opportunity that the appraiser has to defend his/her work is once a penalty investigation begins or OPR contacts the appraiser. This is an unfortunate instance where the appraiser has not been afforded the opportunity to discuss the subject appraisal at the examination level.  However, penalties and sanctions will not be imposed without a comprehensive investigation, which will include the opportunity for the appraiser to discuss his/her work.

We appreciate Woolbert’s prompt response to this week’s BVWire and her clarification—which consist of her opinions, not those of the IRS.

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