Noncertified occasional valuer is not a qualified appraiser, per Tax Court
For tax purposes, the most important requirement under the qualified appraisal rules is that the valuation be done by a qualified appraiser. But how much experience is enough? A new case gives some guidance.
Hoensheid v. Comm’r (In re Estate of Hoensheid)
The taxpayers made a valid gift of stock, but they realized and recognized gain because their right to the proceeds from the sale occurred before the gift was made. They also were not entitled to a charitable contribution deduction because they did not procure a qualified appraisal. The taxpayers were not liable for an underpayment penalty.
Petitioners Not Allowed a Charitable Contribution—Did Not Use a Qualified Appraiser
The taxpayers made a valid gift of stock, but they realized and recognized gain because their right to the proceeds from the sale occurred before the gift was made. They also were not entitled to a charitable contribution deduction because they did not procure a qualified appraisal. The taxpayers were not liable for an underpayment penalty.
IRS hits taxpayer with gross valuation misstatement penalty
Easement cases before the Tax Court can offer some interesting insights and guidance to BV professionals.
Brooks v. Comm’r
The IRS disallowed carryover charitable deductions for donation of a conservation easement by taxpayers’ family LLC to the county where the property lies. In addition to the disallowance of the donation deductions, the IRS assessed gross overvaluation penalties. The Tax Court denied the deductions in part for lack of following regulations and procedures. Additionally, the court found that the value determined by the taxpayers’ appraiser was filled with errors and had basic incorrect assumptions resulting in a gross misstatement of value. Thus, taxpayers were liable for the 40% accuracy-related penalty resulting from a gross valuation misstatement pursuant to section 6662(h) as determined for each of the years in issue.
Taxpayer Is Denied Charitable Deduction for a Conservation Easement, and Gross Valuation Misstatement Penalties Are Applied
The IRS disallowed carryover charitable deductions for donation of a conservation easement by taxpayers’ family LLC to the county where the property lies. In addition to the disallowance of the donation deductions, the IRS assessed gross overvaluation penalties. The Tax Court denied the deductions in part for lack of following regulations and procedures. Additionally, the court found that the value determined by the taxpayers’ appraiser was filled with errors and had basic incorrect assumptions resulting in a gross misstatement of value. Thus, taxpayers were liable for the 40% accuracy-related penalty resulting from a gross valuation misstatement pursuant to section 6662(h) as determined for each of the years in issue.
Tax Court deals another blow to cannabis dispensaries
In recent years, numerous cannabis businesses that are legal under state law have unsuccessfully challenged section 280E of the Internal Revenue Tax Code, which prohibits tax deductions for a business that “consists of” trafficking in a controlled substance.
Structure, Valuation & Tax Insights for Logistics & Trucking Companies
Join Jaclyn Burket Frank and Ricky Castillo for an engaging trip into the world of logistics and trucking businesses. Discover the different types of entity structure along with the advantages and disadvantages of each structure. Learn how the 2018 tax law impacted each entity structure and common deductible/nondeductible expenses for the logistics and trucking industry. The industry-specific adjustments to consider along with specific questions to ask business owners to determine whether economic, governmental, and location ...
D.C. Circuit Upholds Remainder-Interest Valuation in Weird Charitable Contribution Case
In charitable contribution case involving remainder interest, D.C. Circuit upholds Tax Court’s value-related findings, including that petitioner did not provide qualified appraisal and did not meet substantiation requirements; valuation here is to be based on FMV, not actuarial tables.
Blau v. Commissioner (RERI II)
In charitable contribution case involving remainder interest, D.C. Circuit upholds Tax Court’s value-related findings, including that petitioner did not provide qualified appraisal and did not meet substantiation requirements; valuation here is to be based on FMV, not actuarial tables.
BVU News and Trends November 2018
A monthly roundup of key developments of interest to business valuation experts.
Can ESOP Appraisal Satisfy Charitable Contribution Reporting Requirement?
Court finds using ESOP appraisal to show “qualified appraisal” is a long shot to meet charitable contribution verification requirements because appraisal did not consider tax consequences or value shares individual petitioners donated, but petitioners may have reasonable cause defense.
Chrem v. Commissioner
Court finds using ESOP appraisal to show “qualified appraisal” is a long shot to meet charitable contribution verification requirements because appraisal did not consider tax consequences or value shares individual petitioners donated, but petitioners may have reasonable cause defense.
Valuation of private company stock for donations
Chris Mellen (Valuation Research Corp.) reports a marked increase in demand for valuations of shares of privately held companies before an M&A transaction in connection with a charitable gift.
Tax Court Introduces Formula to Value Donated Remainder Interest
Tax Court rules for IRS in disallowing deduction for charitable contribution involving remainder interest in leased property; requisite appraisal summary omits vital information, and court’s valuation formula shows donor made gross valuation misstatement.
Tax Court Introduces Formula to Value Donated Remainder Interest
Tax Court rules for IRS in disallowing deduction for charitable contribution involving remainder interest in leased property; requisite appraisal summary omits vital information, and court’s valuation formula shows donor made gross valuation misstatement.
RERI Holdings I, LLC v. Commissioner (RERI I)
Tax Court rules for IRS in disallowing deduction for charitable contribution involving remainder interest in leased property; requisite appraisal summary omits vital information, and court’s valuation formula shows donor made gross valuation misstatement.
Manipulation of Valuation of Bequeathed Stock Sinks Charitable Contribution Claim
Tax Court says executor of estate in series of post-death measures changed the value and size of decedent’s stock donation and may not claim date-of-death value of assets not actually transferred to family foundation; court affirms estate tax deficiency.
Estate of Dieringer v. Commissioner
Tax Court says executor of estate in series of post-death measures changed the value and size of decedent’s stock donation and may not claim date-of-death value of assets not actually transferred to family foundation; court affirms estate tax deficiency.
RERI Holdings I, LLC v. Comm’r
Tax Court denies IRS’s summary judgment motion to disallow claimed charitable deduction arguing taxpayer’s appraiser improperly valued donated interest in LLC using present-value Section 7520 tables and failed to submit “qualified appraisal.”
Valuing a Hypothetical Asset Renders Appraisal ‘Meaningless’
Tax Court says petitioner failed IRC’s section 170 requirements for charitable contribution deduction because his claim leaned on appraisals of the donated building that were not qualified; neither valuation was timely or established the asset’s fair mark ...
Alli v. Commissioner
Tax Court says petitioner failed IRC’s section 170 requirements for charitable contribution deduction because his claim leaned on appraisals of the donated building that were not qualified; neither valuation was timely or established the asset’s fair mark ...
Federal Court Clarifies When IRS Can Subpoena Appraiser’s Work File
9th Circuit confirms that IRS may subpoena appraiser’s work files when the taxpayers’ liability has not yet been “finally determined”—and also no privilege or protections when the report was prepared primarily to comply with tax laws.
United States v. Richey
Ninth Circuit confirms that IRS may subpoena appraiser’s work files when the taxpayers’ liability has not yet been “finally determined;” and also, no privilege or protections when the report was prepared primarily to comply with tax laws.
