Estate & Gift Tax Appraisals
Federal Appraisal, LLC offers specialized appraisal services for the gifting of closely held companies and assets, partnership interests, and real estate holdings, as well as for addressing IRS estate issues.
Real Estate Appraisals for Estate & Gift Tax Purposes
Each appraisal ought to be tailored for its specific purpose. An appraisal intended for one use may not be suitable for another. Therefore, appraisals should be specifically crafted for estate and gift tax purposes. Federal Appraisal excels in providing real estate appraisals for various IRS reporting needs, including estate and gift tax purposes.
Business Appraisals for Estate & Gift Tax Purposes
Similar to real estate appraisals, business appraisals for estate and gift tax purposes are distinct from those conducted for other reasons. Federal Appraisal specializes in these types of appraisals, focusing on businesses and business intangibles.
See Business Valuation/Asset Type for more.
Estate Planning News and Updates
As 2025 approaches, the new administration is expected to bring significant changes to estate planning and wealth management strategies. Anticipated shifts in tax policy, including potential changes to estate and gift tax exemptions, could impact wealth transfer planning. The administration is likely to reverse certain estate tax provisions from previous administrations, potentially benefiting high-net-worth individuals. Additionally, regulatory changes may reduce restrictions on trust structures, creating new opportunities for asset protection. These developments will influence how families and businesses approach wealth preservation, requiring a reevaluation of strategies to ensure efficient asset transfer with minimal tax liability.
Estate Planning Topics for the New Presidential Administration
Experts foresee 2025 as a crucial year for tax policy, similar to the impact of the 2017 Tax Cuts and Jobs Act (TCJA). Without congressional action to extend specific TCJA provisions, tax increases exceeding $4 trillion will take effect on January 1, 2026. Alternatively, extending the TCJA tax cuts may necessitate new tax hikes to balance the budget. The TCJA temporarily raised the lifetime estate and gift tax exemption to $13.61 million per individual or $27.22 million per married couple. Without congressional intervention, this exemption will revert to $5 million, adjusted for inflation, on January 1, 2026.
Potential changes could affect the taxation of appreciated assets. The TCJA reduced taxes on long-term capital gains. Currently, heirs can inherit property without paying capital gains tax on appreciation during the decedent’s lifetime, as the asset’s basis is “stepped-up” to its fair market value at death.
The Trump Administration might propose changes to tax-advantaged retirement accounts like 401(k)s and IRAs. These changes could limit contributions or alter the tax treatment of these accounts, potentially reducing immediate tax benefits. Alternatively, there may be proposals to incentivize savings in different accounts or modify rules around required minimum distributions.
Under the new administration, trust laws could be revised, particularly regarding estate and gift taxation. These revisions might simplify trust structures or modify regulations governing irrevocable trusts and grantor-retained annuity trusts (GRATs). Changes could also aim to reduce the complexity of trust taxation, affecting how families use trusts for wealth transfer and asset protection.
Changes in tax exemptions and capital gains laws, particularly the estate tax exemption and the step-up in basis rule, could significantly impact interfamily asset transfers. For example, if the estate tax exemption decreases, families might accelerate transfers to heirs before the change. Similarly, changes to the capital gains tax could influence how families transfer appreciated assets, affecting gifting and wealth distribution strategies.
Discount Studies
Estate and gift tax appraisal issues have become increasingly complex. Effective management requires two distinct appraisals. The first is an appraisal of the underlying real property, business, or asset as if it were an undivided/fee simple interest. The second is an appraisal of the discount to be applied to the undivided/fee simple interest to determine the value of a partial interest. These appraisals are commonly referred to as “discount studies.”
A crucial part of the estate and gift tax analysis is determining the appropriate discount for partial interests. The lack of control and influence on management, and the lack of marketability and illiquidity associated with a partial interest, can significantly reduce the value and, consequently, the taxable basis. When discounting for less than a controlling interest, several factors should be considered, including but not limited to:
- Lack of Marketability and Illiquidity: Restrictions on sale, rights to partition, blockage factors, investor appetite for type of investment, cost of delay and reduced cash flow, indefinite or finite investment/partnership.
- Lack of Control and Management: Size of interest and dispersion of voting interests, limits to distributions, restrictions on transfer of interest, key person, general or limited partnership interest.
Leveraged Reverse Freezes
The process of undergoing a Leveraged Reverse Freeze can be highly complex. In a leveraged reverse freeze, a preferred partnership interest is exchanged for either a note, transfer of preferred partnership interest to a designated grantor retained annuity trust (GRAT), or other types of real estate planning means. The end goal of a leveraged reverse freeze is for the receiving family member or GRAT to receive a portion of the cash flow and appreciation after all interest payments/GRAT annuity payments have been accounted for. Federal Appraisal offers services to assist those interested in partaking in a Leveraged Reverse Freeze.
Form 8283
Federal Appraisal, LLC has experience with and can certify (sign) Form 8283, Non-cash Charitable Contributions as well.
