Minimizing Tax Problems With Qualified Appraisals

California property values are through the roof. For those of us who live in Los Angeles County, Ventura County, Santa Barbara County or Orange County and are considering making a gift of property, obtaining an appraiser to help determine the value of an asset to be gifted or that is in an estate is an important decision. This is true whether the California property is held in your own name or in the name of a limited liability company (LLC).

You don’t want to pay for an appraisal, and then lose the case, have a large deficiency or penalties imposed, or suffer the embarrassment of the court telling the appraiser that his testimony is “full of holes”.

California and other courts continue to ignore, criticize and occasionally use the testimony of appraisers to determine a disputed value.

Reputation and price of appraisal firms necessarily seem to assure success.

Appraisers must state their qualifications and show their understanding that a substantial or gross valuation misstatement may subject the appraiser to a civil penalty under Internal Revenue Code section 6695A in the appraisal.

Here are some suggestions in working with – and selecting – appraisers:

1. Confirm that the appraiser is full time and independent.

2. Check to be sure the appraiser is credentialed – in the subject matter to be appraised!

3. Confirm that key information, dates, and facts are correct.

4. Insist that the appraisal considers the various valuation methods, and if some are rejected or given less weight than others, a reason is given and supported for that action.

5. Involve the appraiser early.

6. Make sure your appraiser has statistical expertise and the numbers add up – and are current!

7. Confirm that the appraiser is not too “creative”.

8. Check to be sure the appraiser has the ability and willingness to listen – as well as to engage the client and others in order to obtain important information that others may not have asked.

Structuring your gift or creating an estate tax strategy to minimize or avoid tax requires the input of a qualified California tax attorney. Call Mitchell A. Port at (310) 559-5259 to discuss the tax strategy you have in mind or that may be available to you.