Tax Exemption Expiration Drives Appraisals

September 5, 2012 at 3:15 pm Leave a comment

The current all-time high lifetime gift tax exemption is set to expire December 31, 2012. Appraisals are key to establishing the fair market value of assets gifted before the deadline.

The lifetime gift tax exemption is $5.12 million for individuals and double that amount for married couples pooling their resources – that’s about to change unless the Congress acts before December 31, 2012. If the exemption is allowed to expire, it will revert back to $1.0 million. The IRS’ basic publication on estate and gift taxes can be found in this IRS brochure (PDF).

Get a qualified appraisal

Reuters has recently published an article on the role that appraisers play in valuing gifted assets, along with some practical advice for people trying to get their estate planning up to date. The article stresses the need for qualified appraisers to support the value of gifted assets – be it real estate, stock in private companies, artwork, or other assets. With only four months left before the deadline, Reuters also advises readers to select those qualified appraisers with sufficiently large staffs to handle the rush for appraisals as the deadline nears.

The real test of the appraisal will be years after it is performed, when the IRS challenges it during an audit. Aside from being sufficiently staffed and properly credentialed, the selected valuation firm needs to have the permanency to be available to support and defend its valuation opinion if challenged in the future.

Gunther Hofmann is a Vice President of The Brenner Group and has done extensive work in valuations, M&A, venture capital, and corporate finance with significant international experience in small firms as well as global corporations. Gunther earned a Masters Degree in Electrical Engineering and Business Administration from Darmstadt University of Technology in Germany, and was a Visiting Scholar at UC Berkeley. He is a holder of the Chartered Financial Analyst designation, and a member of the National Association of Certified Valuation Analysts. Gunther is Chairman of the Software/IT Industry Group of the German American Business Association (GABA).

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Entry filed under: Financial Advisory, Valuations.

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