ESOP Qualified Appraiser question

[Tax Cowboy]

Group:

I'm aware of the requirements for the appraiser to sign and declare certain statements on the valuation report annually for an esop. 

An esop adopted in 2007 is under audit and the appraiser has passed away. 

One issue the IRS had brought up is that the appraisal didn't have a statement indicating they hold themselves out to the public and conduct appraisals for other plans. And that the appraisers identifying number which I believe would have included it's EIN were not provided as well. 

I've had other audits where these issues were not relevant. And the IRS didn't disqualify the plan. 

Since this Taxpayer can't call the appraiser to testify what is the solution to prevent disqualificstion of plan? 

Seems odd the Govt would disqualify a plan merely because an EIN wasn't stated on summary or appraisal itself. 

And that a court would disqualify a plan, depriving participants of their benefits, for such a minor error. 

If the irs does disqualify the plan my thoughts were to have taxpayer testify that the trustees were provided the appraisers' identifying number when they hired the company. 

Thoughts and comments appreciated. 

 

 

[Peter Gulia]

Has the examiner suggested the plan’s trustee could not rely on a valuation report because the appraiser was not qualified, or was not independent?

Or that the plan’s trustee had not determined the appraiser was qualified and independent?

[Tax Cowboy]

To clarify Peter, 

The Plans trustee did determine the appraiser was qualified for the tax years in question. Beginning 2008 through 2020.

But the appraisal report doesn't have two of the required declarations. Probably important is that the appraiser was not a party to the transaction. So that isn't an issue. 

I've requested time to correct this issue but I'm preparing for worse case scenario in a disqualification. As we taxpayer was issued a draft Rev Agent Report. 

Trying to find an argument (Treas reg cite, US supreme court case, other persuasive regulations, etc) to show a court that the error in not inserting the declaration should not take away the participants value by disqualifying the plan. 

Seems like the US tax courts will throw away the Baby with the bath water due to an inadvertent oversight of not including the declaration. 

Thoughts and comments are always appreciated. 

 

[Peter Gulia]

If the plan’s trustee made fiduciary findings that the appraiser was qualified and independent, perhaps the trustee’s record of those findings includes or refers to evidence that shows the desired fact statements?

If the plan’s trustee or the employer paid the appraiser her fee, perhaps the tax-information reporting shows the Employer Identification Number?

Beyond those fact-gathering pointers, one or more of the plan’s fiduciaries might want each’s lawyer’s advice about whether there might be a claim grounded on the appraiser’s negligence, what statute-of-limitations or repose period governs such a claim, whether law regarding a decedent’s estate accelerates a time bar on claims, and whether a prudent fiduciary should or should not pursue a claim.

[CuseFan]

On 7/6/2023 at 5:20 PM, Peter Gulia said:

If the plan’s trustee or the employer paid the appraiser her fee, perhaps the tax-information reporting shows the Employer Identification Number?

Exactly, someone would have been required to secure the appraiser's EIN.