When your business represents both your life's work, valuation accuracy isn't just about tax compliance; it's about protecting your legacy. The IRS understands these stakes, which is why estate and gift tax reporting business valuations are subject to intense scrutiny.
For closely held businesses, professional business valuation isn't optional. Estate and gift taxes are calculated based on the fair market value, and the IRS requires that this value be established through an accredited, independent appraisal done by a certified business valuation firm. A business valuation that is not done correctly risks penalties and disputes. An overvaluation can force families to liquidate assets to cover unnecessary tax bills or eat up IRS tax exemptions.
At Sun Business Valuations, estate and gift tax business valuation represents a major focus of our practice. We deliver defensible, IRS-compliant business valuation reports that give families and their advisors confidence during critical transitions—whether you're planning years ahead, preparing an estate return after a loss, or implementing a lifetime gifting strategy.
What Is an Estate and Gift Tax Valuation?
An estate and gift tax reporting business valuation establishes the fair market value of a business interest for tax reporting purposes.
When business ownership is involved, this value is not always straightforward. Unlike publicly traded stock, closely held businesses lack an open market. That is why the IRS requires professional appraisals that comply with Revenue Ruling 59-60 and the Uniform Standards of Professional Appraisal Practice (USPAP).
A qualified business valuation ensures estate and gift tax returns are filed accurately, heirs receive fair allocations, and IRS challenges can be addressed with confidence—three outcomes that protect both your legacy and your family's financial security.
Why Professional Valuations Matter in Estate & Gift Planning
A business valuation is more than a compliance document; it is a planning tool. Working with an accredited firm like Sun Business Valuations helps business owners and families:
- Comply with IRS rules - Filing tax documents without a defensible business valuation exposes estates to costly disputes.
- Plan liquidity needs - Knowing your company’s value helps arrange life insurance or cash reserves to cover estate taxes.
- Transfer wealth efficiently - Gifting shares during life can reduce the taxable estate, but requires defensible, up-to-date valuations.
- Protect family harmony - An independent business appraisal prevents disagreements among heirs by establishing a clear, objective value.
Estate Taxes and Business Ownership
When a business owner passes away, estate taxes are calculated based on the value of their ownership interest. This valuation becomes a cornerstone of the estate tax return. If the business is overvalued, the family may overpay in taxes or be forced to sell assets to cover the liability.
Our comprehensive valuation reports apply accepted methodologies, document financial analysis and comparable market data, and provide the detailed support that estate attorneys and CPAs need for filing with confidence.
Gifting Shares and Lifetime Transfers
Many business owners reduce future estate taxes by gifting shares of their company during their lifetime. This strategy can take advantage of the annual gift tax exclusion or the lifetime exemption, helping preserve family wealth across generations.
Each gift requires an updated business valuation to establish fair market value at the time of transfer. These business valuations must be well-documented in the event the IRS reviews the gift tax return. Sun Business Valuations prepares thorough reports that withstand scrutiny, protecting both the donor and the recipient.
Common scenarios include:
- Annual gifting of minority shares to children or grandchildren.
- Establishing trusts funded with business interests.
Majority vs. Minority Interests in Closely Held Businesses
Not all business interests are valued equally. A majority (controlling) interest often commands a higher value because it carries decision-making authority. Minority interests across various business structures—including C corporations, S corporations, partnerships, and limited liability companies (LLCs)—are typically subject to discounts for lack of control and lack of marketability.
These discounts can reduce reported value by 20–40%, significantly impacting tax liability. Because discounts are closely scrutinized by the IRS, it is critical to have a proper, well-documented report prepared by an accredited valuation firm. These discounts must be rigorously supported.
Sun’s team has deep experience valuing both controlling and minority interests, ensuring every report is defensible, accurate, and compliant.
IRS Compliance and Audit Readiness
The IRS closely monitors estate and gift business valuations. Poorly supported reports may lead to audits, disputes, and penalties. Sun Business Valuations helps protect clients by:
- Following USPAP and IRS Revenue Ruling 59-60.
- Documenting every assumption and methodology.
- Providing expert testimony support, if needed, in case of IRS review.
With Sun Business Valuations, you gain peace of mind knowing your valuation is built to withstand IRS scrutiny.
Related Estate & Gift Valuation Services
In addition to estate and gift tax valuations, Sun provides comprehensive support for ownership transition planning, including succession planning valuations, date-of-death appraisals, and gifting strategies for closely held stock. We also value partnership and LLC interests—whether whole or fractional ownership in family limited partnerships—and create non-voting stock structures for efficient wealth transfer. Estate attorneys and tax advisors regularly engage us to prepare defensible reports for complex client situations.
Ready to Discuss Your Estate & Gift Tax Valuation?
Estate and gift planning involves making important decisions that impact your family and business. Having a clear, accurate valuation is the foundation of a successful plan.
To discuss your situation and receive information about the business valuation process, time frame, and cost, please call Stephen Goldberg, Managing Partner, at 800.232.0180, or complete this form, and we will get back to you shortly.