DETAILED VALUATION REPORTS REQUIRED
A case, Estate of Scanlan, TCM 1996-331, reconsideration denied, TCM 1996-414, has a profound impact on the reporting process of valuation to be used for IRS purposes (estate, gift, or income tax). In that case, an appraisal firm had prepared a detailed valuation of a company in 1989. In 1991, another valuation was needed for gift tax purposes. A letter update was provided based on and referencing the previous detailed valuation prepared by the same appraisal firm. The Tax Court completely rejected his 1991 report as it was an update of the previous report, did not have sufficient detail (as a letter report would not), and indicated the failure to visit the site (even though it had been inspected for the previous report and management had informed the appraiser that no changes had taken place). In sum, the Court rejected a letter report which does not conform to the requirement for preparing a thorough detailed report.
It is our current practice to no longer prepare these types of letter reports for any valuations to be used for tax purposes. Any reports which do not provide a full detailed analysis including a site visit should be viewed with concern and skepticism especially in light of Scanlan.
