Hot Topic in Valuation – Inflation Reduction Act Impact on Business Valuation

By ASL Business Valuation Group

The Inflation Reduction Act provided the Internal Revenue Service (IRS) with $79.4 billion in additional funding to transform tax administration and services. Earlier this year, the IRS released its 2023 to 2031 Strategic Operating Plan that sets forth a framework for using this funding. One of the IRS’s goals is to improve the audit procedures and possibly select more valuation cases for examination.

The most significant areas usually challenged by the IRS in gift and estate valuations are discounts for lack of control and lack of marketability. We expect that the IRS scrutiny regarding the size of the discounts is likely to increase in the coming years.  Because of this, it is critical that any valuation that is done for gift or estate be considered a Qualified Appraisal Report (per the IRS’s definition) and have clear and complete explanations that support the discounts used.  If you have questions about Qualified Appraisal Reports, please contact the Valuation Services Team at ASL.