Appraisal (equity)
Also: appraisal, qualified appraisal, equity appraisal, gift appraisal
A formal written valuation by a qualified appraiser, required by the IRS for non-publicly traded property transferred by gift over $5,000 or by estate, to establish fair market value for tax reporting.
A qualified appraisal is a written valuation document prepared by a qualified appraiser that meets the IRS requirements in Treasury Regulations 1.170A-17 (for charitable contributions) or equivalent rules for gift and estate purposes. The appraiser must be credentialed (ASA, CBA, or equivalent), independent of the transferor, and the appraisal must be timely, prepared no earlier than 60 days before the transfer and before the filing due date. Without a qualified appraisal, the taxpayer cannot claim discounts, and the IRS is free to use its own valuation at audit.
Example: a founder gifts 20% of her private company stock to a trust in 2025. She hires an ASA-credentialed appraiser specializing in private equity to issue a $12 million appraisal with a 22% combined discount, supporting a $9.36 million gift reportable value. The appraisal is attached to Form 709.
Common mistake: using an old 409A report as the gift appraisal. 409A valuations are prepared for compliance with tax option-pricing rules and typically do not meet the qualified appraisal standard for gift tax. The IRS rejects them at audit.
Equity appraisals matter at every gift of private company stock, at valuation of pre-IPO positions in trusts, and at estate tax filings containing concentrated stock.