The AICPA National BV Conference in New Orleans this week attracted over 1,000 CPA/ABVs to hear best practices and professional updates along five tracks: fair value for financial reporting, litigation, fundamentals, niche, and emerging/hot. Attendees also received greetings from the IRS—“not always what you want to hear,” quipped Brenda Woolbert, Team Manager for IRS engineers and appraisers. Woolbert sent a shout-out to only one, Warren Miller, for giving her session “a great set-up” on the potential minefields that part-time appraisers could stumble over. (Miller’s comments appeared in last week’s BVWire™.) The specific behaviors that have led to recent penalty investigations include:
- Assuming facts that do not exist
- Purposefully excluding a valuation approach that produces credible results
- Ignoring strong market evidence
- Presenting false information
- Including implausible assumptions as to future events
- Assuming forms of ownership that do not exist
- Intentional disregard of professional standards of appraisal practice
- Any participation by an appraiser that results in a value determination intended to reduce tax without objective and credible evidence to support the appraisal
With the recent extension of § 6695A penalties to estate and gift tax returns, the IRS has an even stronger tool to address perceived appraisal abuses, Woolbert said, although she identified a possible inequity. Memorandum AM 2007-17 clearly restricts application of 6695A penalties to “gross” and not “substantial” misstatements of value, while both standards apply to the assertion of penalties under income tax provisions. In the future, the IRS may correct or amend § 6695A to apply to substantial misstatements of value in E&G tax cases.
Another potential minefield: Under the current process, an investigation can proceed against the taxpayer without involving the appraiser. “This is an unfortunate instance where the appraiser has not been afforded the opportunity to discuss the appraisal at the examination level,” Woolbert said. No penalties or sanctions will be imposed without a comprehensive investigation, however, during which the appraiser may discuss his/her work. The Service is still developing a website for practitioners, and may issue further guidance on 6695A penalties in the future. On a positive note: the new AICPA BV Standards, SSVS No. 1, will “absolutely” meet the compliance criteria of Notice 2006-96, the interim guidelines on qualified appraisal/appraiser under the Pension Protection Act.
Want to stop working weekends? Then “please consider the IRS an employer.” The engineering division has several openings—a rare and challenging opportunity to work “for lower pay but you don’t work weekends,” Woolbert said, with her signature sense of humor (which is of course her own, and not that of the IRS, along with her statements and opinions). For current employment information, click here.
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