TAX COURT REJECTS TAXPAYER’S APPRAISAL AS “NOT QUALIFIED,” THUS SIDESTEPPING ANY EVIDENCE OF VALUE
Assuring the Quality of an Appraisal is More Important than Ever
By Howard A. Lewis, Executive Director
The United States Tax Court, in a memorandum decision (Scheidelman v. CIR, T.C. Memo. 2010-151, No. 15171-08), dated July 14, 2010, sustained deficiencies and penalties assessed against the taxpayer, disallowing deductions claimed for charitable contributions of an historic façade easement. Most tax valuation disputes center on the value of the property. The IRS rarely asserts deficiencies and even more rarely tries cases on the basis of the qualifications of the appraiser or the quality of the appraisal. I believe Scheidelman is an important signal, from the IRS and the Tax Court, and the appraisal community is well advised to take heed.
Notwithstanding the memorandum nature of the decision, the IRS and its appraisers will understandably see this decision as further reason to inquire deeply and analyze critically both appraiser qualifications and appraisal quality. In this instance, the IRS argued that the taxpayer’s appraisal did not satisfy the requirements of Regulation Section 1.170A-13(c), which specifies the elements required to be contained in a qualified appraisal. The fact that this matter involves a charitable contribution deduction is less important than the understanding that comes from an analysis of the Service’s approach to appraiser qualifications and appraisal quality. Most of the evidence at trial dealt with the valuation of the property. The Court opined, “Because we conclude that the Drazner report is not a qualified appraisal, we do not discuss this evidence or reach a conclusion as to the value of the easement.” I admit that I argued for years that the IRS should pay more attention to the rules governing appraiser qualifications and appraisal quality and, I admit, I am glad they are doing so. It makes the value of our profession’s education and accreditations more important than ever, and IBA is uniquely positioned to address the specific issue of “what constitutes a qualified appraisal?”
Appraisers interested in learning some of the ways that IRS appraisers review appraisal reports can attend IBA’s course Business Appraisal Review (ABAR) Accreditation Workshop held in Newport Beach California on August 9-12, 2010 and Washington, D.C. on October 25-28, 2010.
Course 1044 and the associated ABAR accreditation ensures that practitioners and firms are equipped to optimize the quality of business appraisals produced by firm associates by teaching a 5 step process for reading and critically evaluating the quality of a business appraisal report. Avoid potential penalties by ensuring that your reports meet a strict quality assurance protocol as demonstrated in IBA’s ABAR accreditation workshop. You and your taxpayer can both be penalized if your appraisal is determined to be disqualified.
Appraisers interested in distance learning can now attend the Accredited in Business Appraisal Review (ABAR) Designation Available via Distance Learning- A Four Part Webinar Series held on September 13, 2010, October 12, 2010, November 05, 2010, and December 03, 2010. Contact IBA at 800-299-4130 for details or to receive a personal consultation on how your firm can benefit from the ABAR workshop.