IRS Undervaluation Penalties

Defending the value gifted or contributed can be more costly than the cost of a business valuation!

Under Section 6662 of the Internal Revenue Code, undervaluation penalties of up to 40% may be assessed on the value of an asset (which includes owner stock or partnership interest) reported for tax purposes, including gift, estate and generation-skipping transfer tax. The penalty is applied to the difference between the taxpayer’s reported value and the IRS’ assessment of the asset’s value.