Locking in the Three-Year Gift Tax Statute of Limitation

The Taxpayer Relief Act of 1997 amended the Internal Revenue Code to provide that the three-year statute of limitations starts with the filing of a gift tax return, whether or not any tax is paid, provided that the gift is adequately disclosed on the gift tax return. The submission of a business valuation meets these disclosure requirements as long as the report includes the following:

Disclosures regarding the person who prepares the valuation report:

  • The person must be an individual who holds himself or herself out to the public
  • as an appraiser.
  • The appraiser is qualified to make appraisals of the type of property being valued.
  • The appraiser is not the donor, donee, an employee or family member of the
  • donor or donee.

Required contents of the valuation report:

  • The date of the appraisal.
  • The date of the transfer.
  • The purpose of the appraisal.
  • A description of the property.
  • A description of the appraisal process employed, including the valuation method(s) utilized.
  • A description of the assumptions utilized.
  • A description of any hypothetical conditions considered.
  • Descriptions of any restrictions or other limiting conditions present.
  • The information considered in determining the value, including all financial information in sufficient detail to allow the reader to replicate the appraisal analysis and valuation.
  • The reasoning that supports the analysis, opinions and conclusions.
  • Any specific comparative transactions utilized in the valuation analysis.
  • The fair market value of 100 percent of the entity determined without regard to any discounts in valuing the entity or the assets owned by the entity, unless this information is not relevant or material in determining the value of the interest.

 

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Suite 3700 
Chicago, Illinois 60601

(312) 235-2866 (Office)
(847) 477-1954 (Mobile)

 

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