Are You In Compliance With The Pension Protection Act (H.R. 4)? Find Out Below…
Do the new rules apply to gifts of all non-cash property?
Yes, a donor must obtain a “qualified appraisal” by a “qualified appraiser” for all gifts of non-cash property worth over $5,000, and must attach an appraisal summary to his or her tax return (Form 8283). The rules also apply to valuations of gifts for both income tax and gift and tax purposes.
What gifts require a donor to obtain a “qualified appraisal”?
A donor must obtain a qualified appraisal for gifts of property worth more than $5,000, other than cash and publicly-traded securities.
What is a “qualified appraisal”?
The current Treasury regulations define a qualified appraisal as an appraisal document that is:
- related to an appraisal made no earlier than 60 days prior to the date of gift or no later than the due date of the donor’s tax return;
- prepared, signed, and dated by a “qualified appraiser”;
- includes all required information; and
- not involve a prohibited appraisal fee.
Who is a “qualified appraiser”?
has earned an appraisal designation for a recognized professional appraiser organization or has otherwise met minimum education and experience requirements prescribed by Treasury regulations;
- regularly performs appraisals for which the individual receives compensation;
- can demonstrate verifiable education and experience in valuing the type of property subject to the appraisal;
- has not been prohibited from practicing before the IRS at any time during the three years preceding the appraisal; and
- meets any other requirements prescribed by the Treasury.
Who cannot be a “qualified appraiser”?
- the donor;
- a party to the donor’s acquisition of the property;
- employed by or related to any of the above; and
- someone used regularly by any of the above unless the majority of the work is performed for others.
How have the penalties changed for donors?
The new legislation lowers the threshold for imposing agency-related penalties on donors for “substantial” and “gross” valuation misstatements of gifts of non-cash property. The actual penalty taxes imposed on donors remain the same — 20% of the underpayment for a substantial valuation misstatement and 40% for a gross misstatement.