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Don’t Bear “The Burden”

The IRS rarely challenges well-reasoned valuations prepared by qualified, credentialed appraisers.  Submitting such a valuation places the burden on the IRS to prove the valuation unreasonable.  If a tax return filing is submitted absent a credentialed valuation, the IRS will determine a value, and shift the burden to the taxpayer to prove the IRS is unreasonable.  This can be extremely difficult and expensive for the taxpayer.   

  • To adequately protect the parties, the business assets in buy-sell agreements must be based on the standard of Fair Market Value or as finally determined for estate tax purposes. 
  • The value stated in a buy-sell or shareholder agreement may be finding on the parties but is not binding on the IRS for determining tax liability.  
  • The IRS can assess penalties up to 40% of the unpaid tax on undervalued assets, including stock or business interests.  
  • The IRS audits nearly 100% of deceased business owners estate tax returns.  
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