Discounts continue to be the No. 1 red flag that triggers an IRS audit, according to former IRS manager Michael Gregory (Michael Gregory Consulting LLC), speaking at the recent American Society of Appraisers (ASA) International Appraisers Conference in New Orleans. Gregory worked for the IRS for almost 30 years on valuation matters and continues to interact with the agency (he has over 70 contacts there). He is now in private practice, and he helps clients who have IRS disputes regarding business valuation issues as well as other matters.

Explain it: Make sure you have a clear and complete explanation that supports your discount estimates, whether they be for marketability or control, Gregory advises. We point out that we have heard the same remarks directly from IRS officials.

In addition to valuation issues, Gregory also specializes in mediation and conflict resolution, and he told the audience that his website offers some free e-books (click here).