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IRS Reporting for Gifting Shares of Ownership

What You Need to Know About Gifting Stock

Gifting from one generation to the succeeding generation requires an appraisal to satisfy the IRS regulations. The fair market value must be defined and reported in a complete formal report which adheres to the Uniform Standards of Professional Appraisal Practice (USPAP).

A great tax minimization strategy involves gifting ownership in interests less than 51% of the total ownership interest. When gifting non-controlling (minority) blocks of ownership, the value of that block of ownership is treated to a discount as it is less valuable than the prorated ownership basis. For example, a company worth ten million dollars would be taxed at that value while a 49% interest in that same company may be worth three million dollars ($3,000,000) due to the discount recognized by the IRS for non-controlling ownership interests. The amount of the discount varies and must be supported by thorough analysis citing the method used in arriving at the discount rate. Appraiser spend thousands of dollars every year to have access to data used in deriving what is a supportable discount or premium.