Estate & Gift Tax Appraisals

Federal Appraisal, LLC provides appraisal services for gifting closely held stocks or interests in partnerships and real estate holdings and for IRS estate issues.

Real Estate Appraisals for Estate & Gift Tax Purposes

All appraisals are written for specific purposes. An appraisal written for one purpose may not be appropriate for use in another purpose. Appraisals ought to be written specifically for estate and gift tax purposes. Federal Appraisal specializes in appraisals for various IRS reporting purposes, such as Estate and Gift Tax purposes.

Business Appraisals for Estate & Gift Tax Purposes

Similar to the circumstances discussed above, business appraisals (appraisals of businesses and business intangibles) written for estate and gift tax purposes are distinct from appraisals for other purposes. Federal Appraisal specializes in such appraisals.

See Business Valuation/Asset Type for more.

Discount Studies

Estate & Gift tax appraisal issues have become complex over the years.

Essentially, proper management requires two distinct appraisals. The first is an appraisal of the underlying real property or business or asset, as if an undivided/fee simple interest. The second is an appraisal of the discount to be applied to the undivided/fee simple interest in order to find the value of a partial interest. These appraisals are commonly called “discount studies.”

An essential part of the estate and gift tax analysis is the determination of the appropriate discount for partial interests.   The lack of control and influence on management, and the lack of marketability and illiquidity associated with a partial interest can often dramatically reduce the value, and hence the taxable basis.  When discounting for less than a controlling interest, several factors should be considered, including but not limited to:

Leveraged Reverse Freezes

The process of undergoing a Leveraged Reverse Freeze can be highly complex.

In a leveraged reverse freeze, a preferred partnership interest is exchanged for either a note, transfer of preferred partnership interest to a designated grantor retained annuity trust (GRAT), or other types of real estate planning means. The end goal of a leveraged reverse freeze is for the receiving family member or GRAT to receive a portion of the cash flow and appreciation after all interest payments/GRAT annuity payments have been accounted for.

We at Federal Appraisal offer services to help those who interested, or may be interested, in partaking in a Leveraged Reverse Freeze.

Lack of Control and Management

  • size of interest and dispersion of voting interests
  • limits to distributions
  • restrictions on transfer of interest
  • key person, general or limited partnership interest

Lack of Marketability and Illiquidity

  • restrictions on sale
  • rights to partition
  • blockage factors
  • investor appetite for type of investment
  • cost of delay and reduced cash flow
  • indefinite or finite investment/partnership

Form 8283

Federal Appraisal, LLC has experience with and can certify (sign) Form 8283, Non-cash Charitable Contributions as well.