Ohio Business Valuations | Gift Tax Return | Ohio CPA Firm | Rea CPA

Gifting a Business Interest?

Lately we’ve been surprised by how many people are thinking about filing a gift tax return without a business valuation. We’ve had a few conversations with people who are under the impression that they don’t need to attach a valuation of their business interest to the gift tax return.

Before you file your return without a valuation from a professional, consider the consequences:


WITH a Business Valuation

  • You’ll know what the actual value of the gift is and you’ll be able to take full advantage of valuation discounts.
  • There is a three-year statute of limitations. After that, the IRS can’t make adjustments.
  • The IRS probably won’t make any requests for further information.

WITHOUT a Business Valuation

  • You will be guessing about the value of the gift.
  • You don’t have the statute of limitations protection. The IRS can come back at any time and assess gift or estate taxes at very high rates.
  • The IRS can dig deeper to determine your tax liability. This will cost you in time, professional fees and perhaps sleepless nights.

Think about the business valuation report as an insurance policy. With the valuation, you won’t be guessing about the real value of your business and you’re protected from additional taxes from the IRS. The regulation says that “the more complete and comprehensive the information filed with the return is, the more readily the IRS will be to be able to identify the returns that should not be examined, thus saving taxpayers needless expenditures of time and money.”

Please discuss your gifting activities with your Rea tax advisor to ensure that you include the proper documentation with your gift tax return.

This article was originally published in Illuminations: Facts & Figures from people with a brighter way, a Rea & Associates enewsletter, 2/15/12.

Note: This content is accurate as of the date published above and is subject to change. Please seek professional advice before acting on any matter contained in this article.