IRS says appraiser penalties apply to estate/gift returns

BVWireIssue #62-4
November 27, 2007

The question has been hanging over the appraisal community since the Pension Protection Act of 2006 added section 6695A penalty provisions to the Internal Revenue Code: Do these same penalties apply to an appraiser who prepares an appraisal used in connection with an estate or gift tax return?  (See BVWire™ # 53-2.)   In a legal memorandum released just before the holidays, the IRS Office of Chief Counsel provides the answer:

The Service may assess a section 6695A penalty against an appraiser for appraisals prepared after May 25, 2007 that are used in connection with an estate or gift tax return or claim for refund or credit that results in a gross valuation misstatement.

Further, “there is no period of limitations applicable to the assessment of a penalty under section 6695A….The section 6695A penalty may be assessed at any time.”  To minimize the appraiser’s ability to argue that an assessment has not been made on a timely basis, however, “the Service should assess the section 6695A penalty, to the extent practicable, within three years after the filing of the return or claim for refund on which the penalty is based.”  To read memorandum AM 2007-17, click here.  Expect additional updates from the IRS presentation on “Appraiser Professional Responsibility” at the AICPA BV conference in New Orleans next week.  “Pretty big news,” comments Warren Miller (Beckmill Research), “especially to the part-time valuators lollygagging their way through BV minefields on pogo sticks.”

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