Gift & Estate Tax Valuations
IRS-compliant estate tax valuation and gift tax appraisal for closely held businesses. Fair market value, discounts, and audit-ready reports since 1983.
Gift Tax Valuation and Estate Tax Appraisal
A gift tax valuation sets IRS fair market value of the closely held interest that actually transferred, as of the gift date, for Form 709. An estate tax appraisal does the same at death for Form 706. We write those reports for counsel and CPAs. Principals Blake J. Runckel, ASA, CFA, and Cary M. Carruthers. Call 503-235-7777.
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. That ruling identifies eight factors: 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 estate and gift tax appraisals address each factor in the report.
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.
Form 709, Form 706, and adequate disclosure
The IRS needs a date, an interest, and a method it can follow.
A lifetime gift of a closely held interest is reported on Form 709. A decedent’s interest is reported on Form 706, generally as of the date of death, or the alternate valuation date six months later when that election is properly made. In both cases the standard is fair market value: the price at which the property would change hands between a willing buyer and a willing seller, neither under compulsion, both having reasonable knowledge of relevant facts.
For gift tax, Treas. Reg. § 301.6501(c)-1(f) is the rule return preparers care about. If the gift is not adequately disclosed, the limitations period on that transfer does not start. Adequate disclosure requires either a qualified appraisal or a detailed description of the method used to determine fair market value, together with the other items the regulation lists (the property, the interest, restrictions, discounts claimed, and the identity of the parties). A book-value letter or a broker rule of thumb is not that disclosure.
Gift-tax disclosure is not the charitable “qualified appraisal” rule. Treas. Reg. § 1.170A-17 and the Form 8283 substantiation rules apply to charitable contribution deductions. Form 709 adequate disclosure is a different regulation. We write the report so it can be attached to the return that is actually being filed.
The appraisal has to be of the interest that moved, as of the date it moved. A gift report is not an estate number. An estate report is not last year’s gift. Reusing an appraisal prepared for another purpose, or one that is months off the transfer date, is how a reported gift gets attacked.
If the closely held business interest is more than 35 percent of the adjusted gross estate, IRC § 6166 may allow the estate to defer tax on that interest. That election is counsel’s. The appraisal has to identify the interest and the value the election would rest on.
If the IRS later examines the value, the report is the work product we defend. Testimony is a separate engagement if the exam becomes a dispute. Engagement fees depend on the entity and the interest; current ranges are on our fees page. Call 503-235-7777.
Form 709 adequate disclosure checklist
For a closely held interest on Form 709, adequate disclosure is what starts the three-year assessment period under Treas. Reg. § 301.6501(c)-1(f). Without it, the IRS may revisit that transfer indefinitely. Counsel and the return preparer own the return. The appraisal is the valuation piece that return usually attaches.
Before the Form 709 goes out, confirm the filing package can show:
- A specific description of the interest transferred (units, shares, or percentage) and any consideration received.
- The donor and each donee, with the relationship stated.
- If the gift is in trust: the trust EIN and the instrument (or a clear description of its terms).
- How fair market value was determined: method, financial data used, restrictions considered, and each discount claimed (including lack of control and lack of marketability when those apply).
- A qualified appraisal under Treas. Reg. § 301.6501(c)-1(f)(3), or a detailed method description that meets the regulation on its own.
- Any position on the return that is contrary to a regulation or revenue ruling, stated expressly.
That checklist is for gift tax disclosure on Form 709. It is not the charitable Form 8283 / Treas. Reg. § 1.170A-17 substantiation rule. For Form 706, the same fair market value standard applies as of the date of death or the alternate valuation date when that election is properly made; the appraisal still has to be of the interest that is actually in the estate.
We write gift tax valuation reports so counsel can attach them to the Form 709 that is being filed — for the interest that moved, as of the gift date.
Qualified appraiser for a gift tax valuation
Documents for a Form 709 appraisal of a closely held interest
Gift date and valuation date for a Form 709 appraisal
Under IRC § 2512, the amount of a gift is the fair market value of the property on the date of the gift. Treas. Reg. § 25.2512-1 uses the familiar willing-buyer / willing-seller definition. For a closely held interest, the appraisal is of the interest that actually transferred, as of that transfer date—not a planning estimate from months earlier, and not a report written for another purpose.
Counsel often needs a number before the gift closes. That is normal. After the gift, the question is whether facts known or knowable on the gift date still support the earlier work. A signed letter of intent, financing close, material contract change, capital raise, or change in ownership rights can make a pre-gift conclusion stale. When they do, Form 709 needs a retrospective update using data available as of the gift date.
Date discipline shapes the file. Capitalization, governing documents, and transfer restrictions are read as of the gift date. Financial history and outlook are weighed under the Revenue Ruling 59-60 factors as of that date. Any lack-of-control or lack-of-marketability analysis must match the rights that transferred then. Start from our required documents list; scope and timing are on the fees page.
A gift tax valuation for Form 709 moves faster—and supports adequate disclosure more cleanly—when counsel and the return preparer send a complete information package at engagement. Typical requests for a closely held business interest include:
- Entity and ownership. Operating agreement, articles, bylaws, shareholder or partnership agreement, capitalization table, and a clear description of the interest gifted (class, percentage, voting rights, and any transfer restrictions).
- Financial history. Three to five years of financial statements or tax returns, current interim statements, and detail on owner compensation, related-party transactions, and nonrecurring items.
- Gift facts. Gift date, parties and relationship, any trust instrument, and whether discounts for lack of control or lack of marketability will be claimed on Schedule A.
- Prior transfers. Recent sales of the same interest, prior Form 709 filings for similar gifts, and any buy-sell formula already in the governing documents.
That package lets the appraiser value the interest that transferred as of the gift date under Revenue Ruling 59-60 and document the method the IRS expects to see under Treas. Reg. § 301.6501(c)-1(f). A longer document list for business valuations generally is on our required documents page. Engagement fees depend on scope; current ranges are on our fees page.
For a lifetime gift of a closely held interest, counsel is hiring a gift tax valuation that can be attached to Form 709. IRC § 6695A can impose a penalty on the appraiser if the valuation later produces a substantial or gross valuation misstatement. That is why the report has to be a signed, dated appraisal of the interest that actually transferred, as of the gift date — not a calculation letter, not book value, and not a report written for another purpose.
A qualified appraiser in this setting is independent of the transaction, credentialed to value the interest, and willing to sign the report that goes with the return. Corporate Valuations, Inc. prepares those appraisals to USPAP and ASA Business Valuation Standards. Principals Blake J. Runckel, ASA, CFA, and Cary M. Carruthers lead the work.
The Form 709 filing package still belongs to counsel and the return preparer. Adequate disclosure under Treas. Reg. § 301.6501(c)-1(f) is what starts the limitations period; the appraisal is the valuation piece that package usually attaches. We write it so the interest, the date, the method, and each discount claimed can be followed.
Fees depend on the entity and the interest. Current ranges are on the fees page. Call 503-235-7777.
Valuation approaches for a closely held interest on Form 709
A gift tax valuation is an opinion of the fair market value of the interest that transferred as of the gift date—not a generic enterprise value and not a report written for another purpose. Counsel and the return preparer need a method another competent person can follow, which is the same “replicable” idea behind adequate disclosure under Treas. Reg. § 301.6501(c)-1(f).
Most closely held gifts are supported with one or more of the standard approaches, reconciled in the report:
- Income approach. Capitalized earnings or a discounted cash flow when earning power drives the value of the business interest.
- Market approach. Guideline public companies or guideline transactions, adjusted for size, risk, liquidity, and the block actually transferred.
- Asset approach. When the facts are asset-heavy, or as a reasonableness floor; balance-sheet and inventory items are reflected under gift-tax valuation norms rather than book value alone.
Those indications are weighed against the Revenue Ruling 59-60 factors already discussed on this page (history, economic outlook, book value, earning capacity, dividend capacity, goodwill, prior sales of the interest, and comparable sales). Discounts for lack of control and lack of marketability are analyzed on the interest after the enterprise indication—see Discount Analysis below. Engagement fees depend on scope; current ranges are on our fees page.
Form 706 estate tax appraisal of a closely held interest
An estate tax appraisal for Form 706 values the closely held interest that is actually in the gross estate as of the date of death — or the alternate valuation date six months later when that election is properly made under IRC § 2032. The standard is fair market value: the willing-buyer / willing-seller price under Treas. Reg. § 20.2031-1. Counsel and the return preparer need a report of that interest, as of that date, not last year’s gift appraisal and not a planning estimate written for another purpose.
Date discipline is the same idea as on Form 709, applied at death. Capitalization, governing documents, and transfer restrictions are read as of the valuation date. Financial history and outlook are weighed under the Revenue Ruling 59-60 factors as of that date. Any lack-of-control or lack-of-marketability analysis has to match the rights that passed at death. If the estate elects alternate valuation, the appraisal still has to track what § 2032 actually requires for that interest — including whether the interest was distributed, sold, or otherwise disposed of in the six-month window.
When the closely held interest is more than 35 percent of the adjusted gross estate, IRC § 6166 may allow deferral of tax on that interest. That election is counsel’s. The appraisal has to identify the interest and the value the election would rest on. Chapter 14 restrictions that matter for family holding entities are tested against the facts at death the same way they are on a lifetime gift.
We write Form 706 appraisals so estate counsel can support Schedule F / Schedule G presentation and defend the number if the IRS examines it. Start from our required documents list. Engagement fees depend on scope; current ranges are on the fees page.
What a gift tax appraisal report covers for Form 709
Counsel and the return preparer need more than a concluded dollar figure. A gift tax appraisal for Form 709 is a signed report of the fair market value of the interest that actually transferred, as of the gift date, written so another competent person can follow the method. That is the same replicable idea behind adequate disclosure under Treas. Reg. § 301.6501(c)-1(f).
A typical closely held gift report covers:
- Interest and date. The legal interest gifted, the gift date, and the capitalization and governing documents as of that date—not a planning estimate prepared for another purpose.
- Company and industry context. History, financial condition, earning and dividend capacity, and outlook under the Revenue Ruling 59-60 factors.
- Approaches and reconciliation. Income, market, and/or asset indications weighed to a concluded fair market value of the transferred interest.
- Discounts, when claimed. Lack of control and lack of marketability analyzed on the rights that moved—see Discount Analysis below and our DLOM / DLOC discussion—not assumed as a fixed percentage.
We write those reports so they can be attached to the Form 709 that is actually being filed. Start from our required documents list. Engagement fees depend on scope; current ranges are on the fees page.
Discount Analysis
Discuss Your Valuation Needs
Call 503-235-7777 or request a fee estimate online. We respond within 48 hours.
Discount analysis is often the most examined part of an estate tax valuation or gift tax appraisal. When a family transfers a minority interest in a closely held business, or when interests are restricted as to marketability or control, those interests are worth less than a pro rata share of enterprise value. The discounts have to be supported. The IRS scrutinizes them; see our discussion of IRS challenges to minority discounts on family gifts and the special valuation rules in IRC Chapter 14.
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
Family limited partnerships (FLPs) and family LLCs are a common setting for gift tax appraisals. Transferring assets into the entity and gifting limited or non-controlling interests can produce supportable discounts relative to a pro rata share of net asset value — if the entity has economic substance and the discounts are analyzed, not assumed. We value those interests for gift and estate tax. See also valuation of LLC and partnership interests. Restrictions that lapse, or that the family can remove, are tested under IRC §§ 2703 and 2704. Those are the Chapter 14 provisions that most often limit discounts on family holding entities — not a generic “standard DLOC,” and not §§ 2701 and 2702 (those recast certain retained interests; they are not the discount-limit rules for ordinary FLP transfers).
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. A GRAT funding appraisal is as of the transfer into the trust and must consider facts known or knowable on that date, including a sale process that has already begun (see CCA 202152018). A stale appraisal, or one prepared for another purpose, can collapse the retained annuity and the reported gift.
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.
S corporation stock on Form 709: gift tax appraisal issues
Gifts of closely held S corporation stock are common on Form 709. The appraisal is still an opinion of the fair market value of the interest that actually transferred as of the gift date under IRC § 2512 and Treas. Reg. § 25.2512-1. What changes is the fact pattern the report must address: one class of stock rules, transfer restrictions in the shareholders’ agreement, pass-through tax attributes that a willing buyer would consider, and whether the interest is voting or non-voting.
Counsel and the return preparer need a method another competent person can follow—approaches applied to the interest gifted, not a generic enterprise value written for another purpose. When discounts for lack of control or marketability are concluded, they belong in the report with support tied to the governing documents and company facts as of the gift date, consistent with Revenue Ruling 59-60. That support also matters when the filing is intended to start the assessment period under Treas. Reg. § 301.6501(c)-1(f).
Document lists for entity and ownership papers are on our required documents page. Marketability and control adjustments are covered in more depth on DLOM and DLOC discounts. Fee ranges for gift tax appraisals are on our fees and pricing page.
Family limited partnership interests on Form 709: gift tax appraisal
Gifts of limited partnership or non-managing LLC interests are a frequent Form 709 fact pattern. The appraisal is an opinion of the fair market value of the interest that actually transferred as of the gift date under IRC § 2512 and Treas. Reg. § 25.2512-1 — not a pro rata share of the entity’s net asset value written for another purpose. The report has to address economic substance of the entity, the rights of the interest gifted under the partnership or operating agreement, and whether a willing buyer would pay a control or marketability adjustment relative to a controlling, freely transferable interest.
When discounts for lack of control or lack of marketability are concluded, they belong in the appraisal with support tied to the governing documents and company facts as of the gift date, consistent with Revenue Ruling 59-60. That support also matters when the filing is intended to start the assessment period under Treas. Reg. § 301.6501(c)-1(f). Chapter 14 / §§ 2701–2704 questions are for counsel; the appraisal states the interest valued and the methods used so another competent person can follow the conclusion.
Document lists for entity and ownership papers are on our required documents page. Marketability and control adjustments are covered in more depth on DLOM and DLOC discounts. Fee ranges for gift tax appraisals are on our fees and pricing page.
Entity and ownership papers for these engagements start on our required documents list. Control and marketability adjustments are discussed on DLOM and DLOC discounts; the eight-factor framework is on Revenue Ruling 59-60. Engagement fees depend on scope; current ranges are on our fees and pricing page.
That distinction matters for family limited partnerships, family LLCs, and multi-class capital structures where discounts and preferred retained interests draw IRS attention. We do not render the Chapter 14 legal opinion. We write the Form 709 appraisal so the interest, the date, the approaches, and each discount claimed line up with the facts counsel is reporting — including when Chapter 14 narrows which restrictions may be reflected in value.
In practice, the hire is surgical. If counsel concludes Chapter 14 does not reach the transfer, the appraisal values the gifted interest under ordinary fair market value principles and the Revenue Ruling 59-60 factors, including any supportable lack-of-control or lack-of-marketability adjustments tied to the governing documents as of the gift date. If counsel concludes a right, restriction, or retained interest is disregarded or limited under Chapter 14, the appraisal has to value the interest on the rights that remain after that legal filter — not on a family-only restriction that the Code treats as ignored, and not on a pro rata share of entity net asset value written for another purpose.
Chapter 14 special valuation rules and the gift tax appraisal
When a family transfers an interest in a closely held corporation or partnership, counsel often asks whether IRC Chapter 14 — §§ 2701 through 2704 — changes what a willing buyer would pay for the interest that actually moved. Those sections are special valuation rules for certain family transfers: retained preferred interests (§ 2701), certain retained interests in trust (§ 2702), rights and restrictions that may be disregarded (§ 2703), and lapses or liquidation restrictions that can be ignored or limited (§ 2704). Whether any of those rules apply is a legal question for estate counsel and the return preparer. The gift tax appraisal still has to state the interest valued, the gift date under IRC § 2512, and a fair market value method another competent person can follow for Form 709.
Grantor retained annuity trusts (GRATs) and the gift tax appraisal
A grantor retained annuity trust (GRAT) generally involves a transfer to a trust while the grantor retains an annuity interest. IRC §2702 and the GRAT terms affect how the remainder gift is determined. An appraisal supports the fair market value of the remainder interest reported on Form 709; it does not determine the tax result by itself. The valuation date, trust term, annuity provisions, and other facts are supplied by the grantor’s counsel and tax advisers.
We analyze the underlying closely held interest using the facts available as of the valuation date, with Revenue Ruling 59-60 as context for valuing closely held businesses and interests. Related resources include Revenue Ruling 59-60, DLOM and DLOC discounts, and the required documents for a business valuation. For pricing information, see business valuation fees and pricing, or contact Corporate Valuations, Inc. to discuss the engagement.
Charitable remainder trusts (CRTs) and the gift tax appraisal
When closely held stock or partnership interests fund a charitable remainder trust, the CRT remainder is often the gift reported on Form 709. The appraisal determines the fair market value of the interest transferred into the trust as of the applicable gift date.
The valuation should be coordinated with counsel on the trust terms, the interest transferred, and the reporting position. The factors described in Revenue Ruling 59-60 still apply to closely held interests; discounts are considered only when supported by the facts and governing documents.
CorpVal coordinates with taxpayers, CPAs, and estate counsel on the appraisal; it does not draft CRT trust documents. Start with the required documents, review discounts for lack of marketability and control, or see the business valuation fees and pricing page.
Dynasty trusts, GST tax, and the gift tax appraisal
A dynasty or generation-skipping trust can transfer closely held stock or partnership interests past children to grandchildren (or further), subject to the generation-skipping transfer (GST) tax under IRC Chapter 13. The appraisal problem for the CPA or estate counsel is usually the same as on Form 709: fair market value of the transferred interest as of the gift or allocation date, with discounts and entity facts that another qualified appraiser could replicate.
For GST planning that gifts employer stock, FLP/LLC units, or nonvoting shares into a long-term trust, the Form 709 file typically needs:
- Interest and date. The exact block or units transferred, voting rights, and the valuation date tied to the gift or GST allocation—not a later “update” prepared for another purpose.
- Entity and ownership facts. Capitalization, transfer restrictions, and whether Chapter 14 (§§2701–2704) or buy-sell terms change what a willing buyer would pay for that interest.
- Approaches and discounts. Income, market, and/or asset methods under Revenue Ruling 59-60, plus any DLOC/DLOM supported for the interest actually gifted—not a generic holding-company shortcut.
- Adequate disclosure package. Enough description under Treas. Reg. § 301.6501(c)-1(f) that the Service can understand the valuation without starting the statute of limitations clock on an incomplete return.
We prepare the gift tax appraisal of the closely held interest for Form 709 and related GST reporting when counsel directs the structure. Document requests and fee ranges are on our required documents and fees pages; discount work is summarized on DLOM and DLOC discounts.
Nonvoting and preferred stock gifts on Form 709
Gifts of nonvoting common or preferred stock in a closely held C-corporation or S-corporation land on Form 709 as transfers of a defined equity interest. Under IRC § 2512 and Treas. Reg. § 25.2512-1, the appraisal problem is fair market value of the interest that actually transferred as of the gift date—not a control block, and not a later “update” prepared for another purpose.
For a nonvoting or preferred gift, the Form 709 file typically needs:
- Interest and rights. Class, block size, voting rights (or the absence of them), liquidation preference, dividend rights, and any convertibility or put/call features in the governing documents.
- Capital structure and restrictions. How the gifted class sits relative to other equity; transfer restrictions, buy-sell formulas, and whether those terms change what a willing buyer would pay for that interest.
- Approaches and discounts. Income, market, and/or asset methods in the context of Revenue Ruling 59-60, plus any DLOC/DLOM supported for the interest gifted—not a generic holding-company shortcut.
- Adequate disclosure package. Enough description that another qualified appraiser could replicate the conclusion and that the return supports adequate disclosure under Treas. Reg. § 301.6501(c)-1(f).
Chapter 14 special valuation rules (§§2701–2704) may apply to certain preferred or multi-class structures; counsel decides whether those sections govern the gift. We prepare the fair market value appraisal of the transferred interest for Form 709 when counsel directs the structure. Document requests and fee ranges are on our required documents and fees pages; discount work is summarized on DLOM and DLOC discounts, and the ruling context is on Revenue Ruling 59-60.
Buy-sell agreements, IRC § 2703, and the gift tax appraisal
Closely held companies often gift stock or membership interests subject to a buy-sell, shareholders’ agreement, or operating-agreement transfer restriction. For Form 709, the appraisal question under IRC § 2512 and Treas. Reg. § 25.2512-1 is still fair market value of the interest transferred on the gift date. The agreement is a fact that may affect what a willing buyer would pay—not an automatic substitute for that fair market value conclusion.
When counsel is testing whether a formula price or right of first refusal governs the gift for transfer-tax purposes, IRC § 2703 and related Chapter 14 analysis sit with counsel. Our engagement for the gift tax appraisal focuses on:
- The interest gifted. Class, block size, voting rights, and the exact restrictions that travel with that interest under the governing documents.
- How restrictions affect FMV. Whether the terms change marketability or control for a hypothetical willing buyer and willing seller, in the context of Revenue Ruling 59-60—not a rote formula plug-in.
- Adequate disclosure. Enough description of the interest, restrictions, approaches, and discounts that another qualified appraiser could replicate the conclusion under Treas. Reg. § 301.6501(c)-1(f).
We do not decide whether § 2703 “respects” the agreement; counsel does. We prepare the fair market value appraisal of the transferred interest for Form 709 when that is the engagement. Document requests and fee ranges are on our required documents and fees pages; discount work is on DLOM and DLOC discounts, and the ruling context is on Revenue Ruling 59-60.
Intentionally defective grantor trusts (IDGTs) and the gift tax appraisal
An intentionally defective grantor trust is often funded with a gift of closely held stock or membership interests, sometimes followed by a sale to the trust for a note. For Form 709, the appraisal question under IRC § 2512 and Treas. Reg. § 25.2512-1 remains fair market value of the interest transferred on the gift date (and, when a sale is also reported or disclosed, the interest sold on that transfer date). Grantor-trust income-tax status does not replace that fair market value conclusion.
When counsel structures the IDGT funding or sale, our engagement for the gift tax appraisal focuses on:
- The interest transferred. Class, block size, voting rights, and any transfer restrictions that travel with the interest under the governing documents.
- Gift vs sale facts. Seed gift versus later installment sale to the trust, including whether each transfer needs its own valuation date and report support for Form 709 and adequate disclosure.
- Approaches and discounts. Income, market, and/or asset methods under Revenue Ruling 59-60, with any lack-of-control or lack-of-marketability adjustments supported for that interest—not assumed from a planning illustration.
- Adequate disclosure. Enough description that another qualified appraiser could replicate the conclusion under Treas. Reg. § 301.6501(c)-1(f).
We do not draft the trust instrument or decide grantor-trust tax results; counsel does. We prepare the fair market value appraisal of the transferred interest when that is the engagement. Document requests and fee ranges are on our required documents and fees pages; discount work is on DLOM and DLOC discounts, and the ruling context is on Revenue Ruling 59-60.
Qualified personal residence trusts (QPRTs) and the gift tax appraisal
A qualified personal residence trust transfers a residence (or an interest in one) into a trust that retains a term interest for the grantor, with the remainder treated as a gift for Form 709. When the remainder (or a fractional interest in the residence) is a closely held or hard-to-value property interest, the appraisal question under IRC § 2512 and Treas. Reg. § 25.2512-1 is still fair market value of what was transferred on the gift date—not a planning illustration of estate tax savings.
When counsel structures a QPRT that needs appraisal support for the gift, our engagement typically focuses on:
- The interest transferred. Fee simple, fractional co-ownership, or other interest placed in the trust, including any restrictions that travel with that interest.
- Gift-date fair market value. Value of the remainder (or other transferred interest) on the transfer date for Form 709, with term-interest and remainder economics framed by counsel’s QPRT design—not substituted for an unsupported discount.
- Approaches. Market and/or other applicable methods under Revenue Ruling 59-60 as they apply to that residential interest, reconciled to the interest actually gifted.
- Adequate disclosure. Enough description that another qualified appraiser could replicate the conclusion under Treas. Reg. § 301.6501(c)-1(f).
We do not draft the QPRT instrument or decide whether the trust qualifies under the QPRT regulations; counsel does. We prepare the fair market value appraisal of the transferred interest when that is the engagement. Document requests and fee ranges are on our required documents and fees pages; discount work is on DLOM and DLOC discounts, and the ruling context is on Revenue Ruling 59-60.
Gift and Estate Tax Valuation FAQs
What standard of value does the IRS require?
Fair market value: the price at which the property would change hands between a willing buyer and a willing seller, neither under compulsion and both having reasonable knowledge of relevant facts. That is the standard for gift tax and estate tax appraisals of closely held business interests.
Why does the IRS challenge valuation discounts?
Discounts for lack of control and lack of marketability reduce the taxable gift or estate. They are legitimate when the interest actually lacks control or a ready market, and when the amounts are supported by data. They are challenged when they look formulaic, when the entity lacks substance, or when Chapter 14 special valuation rules are ignored.
Who should engage the appraiser?
Usually the donor, the estate, or counsel acting for them. Early engagement — while a gift or estate plan is being structured, not after a return is filed — gives time to match the appraisal to the actual interest being transferred.
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.