Allocation and Fair Market Appraisals, ASC 805 / IAS 40 The Fair Market Value and Allocation of Assets within a Business Combination Business owner and buyers have numerous reporting obligations concerning the reporting of fair market value, including ASC 805 or International Accounting Standards 40 (IAS 40), ASC 820, ASC 840, ASC 852, ASC 350, and ASC 360.  Further, they have several reporting obligations concerning the allocation of value of assets within a business combination, including ASC 805 (or IAS 40), IRC 1060, and IRC MACRS Depreciation Schedules. Each type of reporting obligations has its own set of requirements, definitions, and classifications. A business combination is the various assets combined to create a business and includes intangibles (contracts, patents, etc.), good will, real property (fee and leased estates, etc.), personal property (machinery, vehicles, etc.), assets and liabilities, equity and debt, and the numerous IRS modified accelerated cost recovery system depreciation schedules (MACRS). As a qualified appraisers as defined by the IRS, Federal Appraisal provides reports to investors and taxpayers with the requisite appraisal documents and advisory support to meet all accounting, SEC, and IRS reporting obligations.  Our allocation appraisals ensure compliance and add value by lowering reporting costs and lowering taxes by providing our client with a sole-source for multi-discipline, high quality appraisals consistent across multiple purposes and uses. ASC 805 Appraisals / IAS 40 The FASB ASC 805, or International Accounting Standards 40 (IAS 40), relates to the reporting of business combinations, when a business is purchased.  It requires properly supported claims concerning the value of the parts of a business combination.  Basically, the purchase price must be allocated, based on their market value, to various numerous assets and liabilities that comprise the business combination.  All companies aiming to comply with GAAP requirements, must comply with ASC 805.  ASC 805 became effective December 15, 2008.  ACS 805 superseded Financial Accounting Standards Board (FASB) Statement of Financial Accounting Standards No. 141 and 141R (SFAS 141, SFAS 141R), and APB Opinion No. 16. IAS 40 Investment Property applies to the accounting for property (land and/or buildings) held to earn rentals or for capital appreciation (or both). Investment properties are initially measured at cost, and with some exceptions, may be subsequently measure using a cost model for fair value model, with changes in the fair value under the fair value model being recognized in profit or loss. We can assist with financial reporting requirements, estimating the fair value of a property’s tangible and intangible assets. Our analysis can further assist independent auditors, management specialists, or outside legal counsels, as well as regulatory or tax authorities.  We are competent in AUD-603, Using the Work of an Auditor’s Specialist, AU-C Section 230, Audit Documentation, AU-C Section 315, Understanding the Entity and Its Environment and Assessing the Risks of Material Misstatement, and AU-C Section 500, Audit Evidence. Internal Revenue Code Section 1060 Purchase Price Allocation Appraisals Allocation appraisals when used for income tax reporting concerning the purchase of a business (a business combination) are sometimes called purchase price allocations.  Internal Revenue Code (IRC) Section 1060, Special Allocation Rules for Certain Asset Acquisitions require the total purchase price of a business combination be allocated among specifically defined classes of assets.  The asset classes are: Class I – cash and general deposit accounts Class II – actively traded securities Class III – assets that are marked to market annually Class IV – inventory and property held for sale. Class V – assets that do not fall within the other classes Class VI – IRC Section 197 assets (intangible assets) except goodwill and going concern value Class VII – goodwill and going concern value See Purchase Price Allocation for more information. Internal Revenue Code MACRS Cost Segregation Appraisals Cost segregation appraisals allows tax payers to save substantial amounts in income taxes, but only if their claims to the Service are properly supported.  Federal Appraisal provides that support via our allocation appraisals. See Cost Segregation for more information. accounting, accountants, audit, IRS, SEC, IRS reporting, SEC reporting, depreciation, useful lives, investor reporting, purchase price allocation, cost segregation, Internal Revenue Code, ASC 350, intangibles, goodwill, ASC 360, property, plant, and equipment, ASC 410, asset retirement, ASC 805, business combinations, ASC 815, ASC 820, fair value, fair market value, ASC 825, ASC 840, leases, ASC 852, Section 1060, Special Allocation Rules, Section 338, Asset Acquisitions, IAS, FIRTA, IFRS, fair value, FASB, impairment, asset valuation, tax planning, tax compliance, qualified appraiser, mark to market, m2m

Allocation and Fair Market Appraisals, ASC 805/IAS 40 The Fair Market Value and Allocation of Assets within a Business Combination Business owners and buyers have numerous reporting obligations concerning the reporting of fair market value, including ASC 805 or International Accounting Standards 40 (IAS 40), ASC 820, ASC 840, ASC 852, ASC 350, and ASC 360. Further, they have several reporting obligations concerning the allocation of value of assets within a business combination, including ASC 805 (or IAS 40), IRC 1060, and IRS MACRS Depreciation Schedules. Each type of reporting obligations has its own set of requirements, definitions, and classifications. A business combination is the various assets combined to create a business, which include intangibles (contracts, patents, etc.), good will, real property (fee and leased estates, etc.), personal property (machinery, vehicles, etc.), assets and liabilities, equity and debt, and the numerous IRS modified accelerated cost recovery system depreciation schedules (MACRS). As “qualified appraisers” according to the IRS, Federal Appraisal provides reports to investors and taxpayers with the requisite appraisal documents and advisory support to meet all accounting, SEC, and IRS reporting obligations. Our allocation appraisals ensure compliance and add value by lowering reporting costs and taxes, providing our client with a sole-source for multi-discipline, high quality appraisals, consistent across multiple purposes and uses. See the article written by FAC managing partner, Mark Pomykacz, MAI and qualified state-certified general real estate appraiser, on the topic of business combinations in real estate appraisal, “Relationships between the Overall Property and Its Parts, and the Three Approaches to Value ” published by the Appraisal Journal, Winter 2009. ASC 805 Appraisals / IAS 40 The FASB ASC 805, or International Accounting Standards 40 (IAS 40), relates to the reporting of business combinations when a business is purchased. It requires properly supported claims concerning the value of the parts of a business combination. Basically, the purchase price must be allocated based on their market value, to various numerous assets and liabilities that comprise the business combination. All companies aiming to comply with GAAP requirements, must comply with ASC 805. ASC 805 became effective December 15, 2008. ACS 805 superseded Financial Accounting Standards Board (FASB) Statement of Financial Accounting Standards No. 141 and 141R (SFAS 141, SFAS 141R), and APB Opinion No. 16. IAS 40 Investment Property applies to the accounting for property (land and/or buildings) held to earn rentals or for capital appreciation (or both). Investment properties are initially measured at cost, and with some exceptions, may be subsequently measured using a cost model for fair value model, with changes in the fair value under the fair value model being recognized in profit or loss. We can assist with financial reporting requirements, estimating the fair value of a property’s tangible and intangible assets. Our analysis can further assist independent auditors, management specialists, or outside legal counsels, as well as regulatory or tax authorities. We are competent in AUD-603, Using the Work of an Auditor’s Specialist, AU-C Section 230, Audit Documentation, AU-C Section 315, Understanding the Entity and Its Environment and Assessing the Risks of Material Misstatement, and AU-C Section 500, Audit Evidence. Internal Revenue Code Section 1060 Purchase Price Allocation Appraisals Allocation appraisals, when used for income tax reporting concerning the purchase of a business (a business combination), are sometimes called purchase price allocations. Internal Revenue Code (IRC) Section 1060, Special Allocation Rules For Certain Asset Acquisitions, require the total purchase price of a business combination be allocated among specifically defined classes of assets. The asset classes are: Class I – cash and general deposit accounts Class II – actively traded securities Class III – assets that are marked to market annually Class IV – inventory and property held for sale. Class V – assets that do not fall within the other classes Class VI – IRC Section 197 assets (intangible assets) except goodwill and going concern value Class VII – goodwill and going concern value See Purchase Price Allocation for more information. Internal Revenue Code MACRS Cost Segregation Appraisals Cost segregation appraisals allow taxpayers to save substantial amounts in income taxes, but only if their claims to the Service are properly supported. Federal Appraisal provides that support via our allocation appraisals. See Cost Segregation for more information.

Partial and Partnership Interest Appraisals Partial interest and partnership interest appraisals start with a sound appraisal of the intrinsic value of the underlying fee simple real estate or overall business. To complete the exercise, the appraiser must then employ special appraisal methodologies and adjustments to ascertain the value of the partial interest in the real estate or of the partial or partnership interest in the business entity. Federal Appraisal provides both the appraisals of the underlying real property and business enterprise and of the partial interest. Our clients are assured that their reporting will withstand accounting, legal audit, and examination, as we have years of experience employing the recognized appropriate and acceptable valuation procedures and reporting methods. We begin with an analysis of the underlying asset, which is an appraisal within itself. Next, we review the relevant partial or partnership interest documents, with accounting and legal counsel when necessary, in order to discern the impact on the value of the documents. Lastly, we research, analyze, then apply the adjustments needed to pro rata value for lack of control and lack of marketability. These adjustments are known as the discount for lack of control (DLOC) and the discount for lack of marketability (DLOC). We appraise limited partner and general partner interests, family limited partnerships (FLPs), fractional estates, deed restrictions, conservation easements, and encumbrances. Since our reports are USPAP compliant and are certified by state certified real estate appraisers with decades of experience in such appraisal issues, we meet the requirements for IRS “qualified appraisers”.

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.