Business Valuation and 2011/2012 Gifting Opportunities

As the 2011 year comes to an end, we are reminded of the increased federal estate and gift tax exemption, which is set to expire after 2012. This increased exemption presents an opportunity for individuals to gift a portion of their estate, whether in the form of cash, real property or privately held business interests. Nearly every gift of a business interest requires an independent valuation from a qualified appraiser. A qualified appraiser (as specified by the IRS) is an individual that has earned a designation from a recognized professional appraisal organization and regularly prepares appraisals for which he or she is paid.

Beyond the IRS specifying that the valuation of the gifted interest be performed by a qualified appraiser, it is important to use a qualified appraiser that has extensive experience and an understanding of the discounts that are commonly involved in the valuation of minority business interests. Most notably, these discounts include the discount for lack of control and discount for lack of marketability, which reduce the ultimate value of the gifted interest.

Allied Business Group provides consulting and independent valuation services to business owners and their advisors for a variety of purposes including estate and gift taxes, exit planning and transactions, litigation, and financial reporting. To learn more about us, please visit our website at www.AlliedBizGroup.com.