Question:

My parents had a gift tax appraisal for a farm in 2013. It was done by the brother-in-law of one of the donees. I read that the appraiser should not be the donor or the donee of the property, or a member of the family of the donor or donee, or any person employed by the donor, the donee, or a member of the family of either. I’m worried that this exposes the gift tax to an IRS audit. I’m not a lawyer but I have asked a lawyer who says not to worry about it, since the chances of an audit are slim to none.

Photo by Gozha Net on Unsplash

Response:

You’re right that the appraisal should not have been done by someone who is related to one of the gift recipients. And the lawyer is correct in advising you that it’s unlikely that there will be an audit. Further, what is the risk of an audit if it were to occur? You’re not saying that you think the brother-in-law’s appraisal was inaccurate for any reason. If the IRS does question it, your family should be able to defend it or commission a new audit with similar results.

Finally, back in 2013, the federal gift tax exemption was $5.25 million for an individual, $10.5 million for a couple. If you believe the farm value exceeded these limits, you really need to get advice from a qualified and experienced tax attorney, not from the internet. No matter how accurate we try to be, we can’t replace a professional “on the ground” who knows all the facts in the case.

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