The Internal Revenue Service’s Office of Professional Responsibility announced March 19 that it reached a settlement with a group of appraisers from a firm accused of aiding in the understatement of federal tax liabilities by overvaluing façade easements for charitable donation purposes.
The appraisal firm was not named, but terms of the settlement agreement allowed the IRS to issue its news release.
In valuing the façade easements, the appraisers applied a flat percentage diminution, generally 15 percent, to the fair market values of the underlying properties prior to the easement’s donation.
The IRS said that under the settlement agreement, the appraisers admitted to violating relevant sections of Circular 230 related to due diligence and submitting accurate documents to the government.
The appraisers agreed to a five-year suspension of valuing façade easements and undertaking any appraisal services that could subject them to penalties under the Internal Revenue Code. The appraisers also agreed to comply with all applicable provisions of Circular 230.
“Appraisers need to understand that they are subject to Circular 230, and must exercise due diligence in the preparation of documents relating to federal matters,” Karen L. Hawkins, director of the OPR, said in the news release. “Taxpayers expect advice rendered with competence and diligence that goes beyond the mere mechanical application of a rule of thumb based on conjecture and unsupported conclusions.”
Read the IRS news release.