Gift & Estate Tax Valuations
Gift & Estate Tax Valuations
IRS-compliant valuations for estate planning, gift tax reporting, and audit defense. Our most specialized service since 1983.
Gift & Estate Tax Valuation Overview
Gift and estate tax valuations represent the most complex and specialized segment of our practice. For over 40 years, Corporate Valuations, Inc. has helped families navigate the intricate valuation requirements of federal and state gift and estate tax law. These valuations require sophisticated analysis, deep knowledge of tax law, and an understanding of how valuation discounts can significantly impact estate tax liability and family wealth transfer.
The value you assign to business interests, investment portfolios, and other assets for gift and estate tax purposes has direct financial consequences. An overvaluation increases estate taxes; an undervaluation invites IRS challenge and potential penalties. Our valuations are carefully researched, rigorously documented, and designed to withstand IRS examination.
IRS Requirements & Standards
Fair Market Value Standard
The IRS requires that all property included in a gross estate be valued at fair market value as of the date of death (or the alternate valuation date six months later). Fair market value is the price at which property would change hands between a willing buyer and a willing seller, neither under compulsion and both having reasonable knowledge of relevant facts. This standard applies to marketable securities, real estate, and closely-held business interests.
Revenue Ruling 59-60
For closely-held business interests, the IRS relies on principles from Revenue Ruling 59-60. This foundational ruling identifies eight factors for valuation: business history, economic and industry outlook, book value and financial condition, earning capacity, dividend-paying capacity, goodwill and intangible assets, recent stock sales, and comparable corporation prices. Our valuations address each factor in detail.
Appraisal Standards
All our gift and estate tax valuations are performed in accordance with USPAP and the American Society of Appraisers (ASA) Valuation Standards. Our President, Blake Runckel, holds the Accredited Senior Appraiser (ASA) credential, and our team includes specialists with extensive training in estate tax valuation.
Discount Analysis
Discuss Your Valuation Needs
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One of the most important aspects of estate tax valuation is discount analysis. When a family transfers a minority interest in a closely-held business, or when interests are subject to restrictions on marketability or control, the IRS recognizes these interests are worth less than their pro rata share of enterprise value. Proper discount analysis can significantly reduce estate tax liability, but discounts must be supported by rigorous analysis to withstand IRS scrutiny.
Discount for Lack of Control (DLOC)
A DLOC reflects that a minority interest holder cannot unilaterally control business decisions, management composition, dividend policy, or exit strategy. This lack of control makes the minority interest less attractive to potential buyers and therefore worth less than a controlling interest. We analyze comparable transaction data and publicly-traded company analysis to support a defensible DLOC.
Discount for Lack of Marketability (DLOM)
A DLOM reflects that closely-held business interests cannot be readily sold in an active, efficient market. Unlike publicly-traded securities, selling a closely-held interest requires finding a buyer, conducting due diligence, and negotiating terms. We analyze each business’s specific characteristics—size, profitability, industry competition, buyer availability—to determine an appropriate DLOM.
Other Discounts & Adjustments
Depending on circumstances, we may analyze swing-vote discounts, key person discounts, and other situation-specific factors. Each discount is carefully documented with supporting analysis and comparable data.
Estate Planning Applications
Family Limited Partnerships
One of the most effective estate tax planning strategies is the family limited partnership (FLP) or family LLC. By transferring business assets to a partnership and distributing limited interests to family members, families can leverage valuation discounts to pass wealth at significantly reduced gift tax values. We provide valuations supporting FLP transfers, analyzing economic value and supporting valuation discounts.
Grantor Retained Annuity Trusts (GRATs)
A GRAT is an irrevocable trust used to transfer appreciating assets with minimal gift tax cost. The grantor receives annuity payments for a specified term, and remaining assets pass to beneficiaries. We provide valuations of assets placed in GRATs and analyze tax effectiveness for each client’s circumstances.
Charitable Remainder Trusts
A CRT allows a donor to transfer appreciated assets, receive income for life or a term of years, and pass remaining assets to charity. The donor receives a charitable deduction for the present value of the charitable gift. We provide valuations and analyze optimal structures for each charitable giving situation.
Dynasty Trusts & GST Tax Planning
For high-net-worth families, dynasty trusts and generation-skipping transfer (GST) tax planning allow multi-generational wealth transfer while minimizing transfer taxes. These complex strategies require sophisticated valuation analysis. We work with attorneys and advisors to provide valuations that optimize family wealth transfer.
IRS Audit Defense & Valuation Support
The IRS actively audits estate tax returns, particularly those with significant valuation discounts or complex structures. Our valuations are designed to withstand IRS examination with comprehensive documentation, clear methodology, and detailed support for all conclusions.
Detailed Documentation & Methodology
We provide comprehensive valuation reports documenting business history, financial analysis, methodology, comparable company research, and detailed calculations. This documentation allows the IRS appraiser to understand our reasoning and supports the estate’s counsel in defending the valuation. Clear documentation often prevents extended disputes and supports settlements.
Expert Testimony & Defense Support
If a valuation is challenged, we provide detailed expert testimony supporting our conclusions. Our principals have significant experience testifying in depositions, administrative proceedings, and federal court. We work with the estate’s counsel to mount a vigorous defense and negotiate resolutions when appropriate.
40+ Years of IRS Relationships
Over 40 years of practice, Corporate Valuations, Inc. has built strong professional relationships with IRS agents, attorneys, and other professionals involved in estate tax matters. This experience gives us deep insight into IRS valuation standards, common audit focus areas, and effective defense strategies.
Optimize Your Family’s Wealth Transfer Strategy
Contact Corporate Valuations, Inc. to discuss gift and estate tax valuation, discount analysis, and strategies for tax-efficient family wealth transfer.