I am gifting shares of my companys stock to my children (or my company is converting from a C Corporation to a Subchapter S Corporation). Why should I hire a business appraiser?
If the IRS audits the gift or challenges the value for any reason, the burden of supporting the value of the business or business interest rests with the taxpayer. Without a well-reasoned valuation from a qualified appraiser, the taxpayer has virtually no basis to dispute what may prove to be an unrealistic IRS valuation claim. If a qualified appraisal has not been completed prior to filing the tax return, the taxpayer will ultimately need to obtain such a valuation when the valuation dispute arises. When faced with a taxpayer valuation based on the opinion of a well-respected, independent analyst, the IRS is essentially forced to hire an equally qualified analyst who can credibly attack the valuation opinion of the taxpayer’s analyst and who can produce an opinion of value different enough to generate a tax revenue advantage for the government. The IRS will only allocate resources to pay for valuations if there is an expectation that the allocation will be more than reimbursed. It is
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