These legal entities allow senior family members to transfer ownership and control of business or investment assets to younger generations through a series of gifts of minority interests. Although they have been gaining favor, this estate planning alternative has come under increasing legal attack from the Internal Revenue Service.
ABA professionals have prepared hundreds of such appraisals for this and other tax-related uses and have successfully answered challenges from the IRS. Our approach to these valuations includes these steps:
- Develop appraisal reports which properly support the value-driving decisions and the size of all discounts taken.
- Prepare appraisals only for gifting of the FLP interest, as of the date on which gifting took place. (Valuations for different purposes, even as of the same date, can legitimately be substantially different because they have different assumptions).
- Support the size of the appropriate discount based on a reasonable assessment of the facts and circumstances.