APPRAISED VALUES 

ON TAX RETURNS 

Burdens on Taxpayers 

Could Be Reduced and 

Selected Practices 

Improved 

Report to Congressional Requesters

June 2012 

GAO-12-608 

United States Government Accountability Office

GAO 
 United States Government Accountability Office 

Highlights of GAO-12-608, a report to 

congressional requesters 

June 2012 

APPRAISED VALUES ON TAX RETURNS

Burdens on Taxpayers Could Be Reduced and 

Selected Practices Improved 

Why GAO Did This Study 

Misstated appraisals used to support 

tax returns have long caused concern. 

In 2006, Congress adopted the 

Pension Protection Act, which changed 

the criterion for when appraisals are 

considered to be substantially 

misstated and created a penalty for 

improper appraiser practices and 

qualifications for appraisers with 

respect to noncash charitable 

deductions. The Tax Technical 

Corrections Act of 2007 extended the 

penalty for misstated appraisals to 

estate and gift taxes. 

Among its objectives, GAO was asked 

to (1) describe the extent to which 

individual, estate, and gift tax returns 

are likely to involve an appraiser and 

the extent to which IRS audits them; 

(2) describe how IRS selects returns 

likely to involve appraisals for 

compliance examinations, and assess 

whether the current appraisal threshold 

is useful; and (3) assess IRS 

procedures for ensuring that its 

appraisal experts are qualified. 

To accomplish these objectives, GAO 

analyzed IRS data, reviewed IRS 

guidance, and interviewed appropriate 

IRS officials. 

What GAO Recommends 

GAO recommends that IRS develop a 

comprehensive quality review program 

for Art Appraisal Services (AAS) and 

establish appraisal training 

requirements specifically for AAS staff. 

Congress also should consider raising 

the dollar threshold at which qualified 

appraisals are required for noncash 

contributions to reflect inflation. IRS 

agreed with our recommendations. 

What GAO Found 

Appraisers’ most prominent role relative to the three types of tax returns GAO 

studied is in the valuation of estates. In the most recent years for which GAO had 

data, appraisers were likely involved in the valuation of property worth from 

$75 billion to $167 billion reported on estate tax returns in 2009. In contrast, less 

than $17 billion worth of gifts in 2009 and less than $10 billion in noncash 

contributions in 2008 likely involved an appraiser. Gift tax returns that likely used 

appraisers had higher audit rates than gift returns that were unlikely to have 

appraisers. The use of appraisers was not associated with higher audit rates for 

estate tax returns and individual returns with noncash contributions. 

The Extent to Which Appraisers Are Involved in Different Types of Returns 

Type of return 

Returns likely to involve 

an appraiser as a 

percentage of 

all returns in that category 

Estimated value

of property likely to

involve an appraiser 

Estate tax returns (filed in 2009) 90 percent to 95 percent $75 billion to $167 billion

Gift tax returns (filed in 2009) 14 percent to 19 percent $13 billion to $17 billion

Returns with noncash 

contributions (tax year 2008) 

Less than 1 percent Less than $10 billion

Source: GAO analysis of IRS data. 

The Internal Revenue Service’s (IRS) procedures for selecting returns to audit do 

not specifically target noncash contributions or gift or estate tax returns 

supported by appraisals. Nevertheless, returns with appraisals do get included in 

the population of audited returns because certain types of returns on which IRS 

does focus, such as higher-income ones, are also the most likely ones to have 

noncash charitable contributions that require appraisals. The current appraisal 

threshold for certain contributions over $5,000 has existed since 1984. The 

absence of an inflation adjustment over the past 25 years means that many 

contributors who pay for appraisals would not have needed to do so when the 

current threshold was first introduced. IRS seldom takes issue with appraisals for 

noncash contributions. Consequently, there seems to be little risk in Congress 

raising the $5,000 dollar threshold. 

IRS appraisal experts in one division met standards for ensuring that they were 

qualified. However, art appraisal experts in another division are not subject to 

either a comprehensive quality review program or continuing education 

requirements specific to appraising art. The lack of comprehensive quality 

reviews and mission-specific continuing education requirements could make the 

art appraisers less effective than they otherwise would be. 

View GAO-12-608. For more information, 

contact James R. White at (202) 512-9110 or 

whitej@gao.gov. 
Page i GAO-12-608 Appraised Values on Tax Returns 

Letter 1 

Background 4

Appraiser Use Is Most Prominent in Estate Taxes, Is Associated 

with a Higher Probability of Being Audited for Gift Tax Returns, 

and Has Led to Six PPA Penalties 6

IRS Does Not Target or Staff Examinations Based on Appraisals, 

but the Current Appraisal Threshold May Impose Unnecessary 

Burden on Taxpayers 11

IRS Follows Accepted Standards When Hiring Qualified Appraisal 

Staff, but Gaps Exist in Training and Performance Evaluation for 

the Art Appraisal Service 16

Conclusions 19

Recommendations for Executive Action 20

Matter for Congressional Consideration 20

Agency Comments 20

Appendix I Scope and Methodology 22

Estate Tax 22

Gift Tax 24

Noncash Charitable Contributions 26

Appendix II Appraisal Reporting Requirements for Noncash Contributions and 

Gift and Estate Taxes 30

Noncash Charitable Contributions 30

Estate Tax Returns 32

Gift Tax Returns 32

Penalty Thresholds and Valuation Misstatements 33

Appendix III Tables on Appraisal Usage and IRS Appraisal Enforcement 34 

Appendix IV Comments from the Internal Revenue Service 45 

Appendix V GAO Contact and Staff Acknowledgments 47

Contents 
Page ii GAO-12-608 Appraised Values on Tax Returns 

Tables 

Table 1: Estimated Numbers and Percentages of Tax Returns and 

Value of Property Likely to Involve an Appraiser 7

Table 2: Number of Estate Tax Returns Filed in 2007 through 2009, 

by Likeliness of Having a Valuation Done by an Appraiser 34

Table 3: Absolute Value of Assets, Deductions, and Exclusions 

Reported on Estate Tax returns, by Likeliness of Having a 

Valuation Done by an Appraiser 35

Table 4: Number of Gift Tax Returns Filed in 2007 through 2009, by 

Likeliness of Having a Valuation Done by an Appraiser 36

Table 5: Absolute Value of Assets, Deductions, and Exclusions 

Reported on Gift Tax Returns, by Likeliness of Having a 

Valuation Done by an Appraiser 37

Table 6: Number of Taxpayers Reporting Amounts in Section B of 

Form 8283 in 2005 through 2008, by Likeliness of Needing 

a Qualified Appraisal 38

Table 7: Value of Deductions Reported in Section B of Form 8283 

in 2005 through 2008, by Likeliness of Taxpayer Needing at 

Least One Qualified Appraisal 39

Table 8: Audit Rates for Estate Tax Returns Filed in 2007 through 

2009, by Likeliness of Having a Valuation Done by an 

Appraiser 40

Table 9: Audit Rates for Gift Tax Returns Filed in 2007 through 

2009, by Likeliness of Having a Valuation Done by an 

Appraiser 41

Table 10: Audit Rates for Taxpayers Reporting Amounts in Section 

B of Form 8283 in 2005 through 2008, by Likeliness of 

Needing a Qualified Appraisal 42

Table 11: Rates of Audit That Included Noncash Contributions as 

an Issue for Taxpayers Reporting Amounts in Section B of 

Form 8283 in 2005 through 2008, by Likeliness of Needing 

a Qualified Appraisal 43

Table 12: No-Change Rates for Audit That Included Noncash 

Contributions as an Issue for Taxpayers Reporting 

Amounts in Section B of Form 8283 in 2005 through 2008, 

by Likeliness of Needing a Qualified Appraisal 44

Figures 

Figure 1: Events in IRS Development of Appraiser Penalty 

Guidance, Calendar Years 2006 to 2010 10
Page iii GAO-12-608 Appraised Values on Tax Returns 

Figure 2: Form 8283, Section B, Part I, Reporting Instructions for 

Noncash Charitable Contributions over $5,000 31

Abbreviations 

AAS Art Appraisal Services 

AQMS Appeals Quality Measurement System 

CIC coordinated industry case 

EOAD Examination Operational Automation Database 

ERIS Enforcement Revenue Information System 

IC industry case 

IRM Internal Revenue Manual

IRS Internal Revenue Service 

LB&I Large Business and International Division 

OPR Office of Professional Responsibility 

PPA Pension Protection Act of 2006 

SB/SE Small Business and Self-Employed Division 

SOI Statistics of Income 

TTCA Tax Technical Corrections Act of 2007 

USPAP Uniform Standards of Professional Appraisal Practice 

This is a work of the U.S. government and is not subject to copyright protection in the 

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without further permission from GAO. However, because this work may contain 

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Page 1 GAO-12-608 Appraised Values on Tax Returns 

United States Government Accountability Office

Washington, DC 20548 

June 5, 2012 

The Honorable Max Baucus 

Chairman 

The Honorable Orrin Hatch 

Ranking Member 

Committee on Finance 

United States Senate 

The Honorable Charles Grassley 

Ranking Member 

Committee on the Judiciary 

United States Senate 

The tax liabilities of individuals who make noncash charitable donations 

or who receive inheritances or gifts of property can depend significantly 

on the valuation of the property. Valuable property such as art, cars, 

businesses, real estate, and easements, by law must be independently 

appraised to determine exactly how much the taxpayer should report on a 

tax return. An appraisal is an opinion about the value of a particular asset 

at a particular time and is prepared following professionally accepted 

procedures. If appraisals overvalue the property in the case of charitable 

donations, or undervalue the property in the case of bequests or gifts, 

taxpayers may—intentionally or mistakenly—pay less tax than they 

should. Although the Internal Revenue Service (IRS) has not determined 

the extent to which appraisals contribute to misreporting, data from an 

IRS study on taxpayer noncompliance showed a 45 percent error rate on 

noncash charitable deductions, totaling $4.6 billion in lost revenue. For 

about every five errors favorable to the taxpayer, one was unfavorable to 

the taxpayer. In 2005 IRS and the Joint Committee on Taxation identified 

overvalued donations of conservation easements1

 as a particularly 

problematic issue. The problem persists. In 2011 the Department of 

Justice sought and the District Court for the District of Columbia issued an 

injunction against a company that IRS identified as improperly 

encouraging taxpayers to seek appraisers who would misvalue 

 

1

 A conservation easement represents a contractual agreement between the property 

owner and a charitable organization receiving the easement to preserve the property. 

 
 

Page 2 GAO-12-608 Appraised Values on Tax Returns 

conservation easement contributions on building façades for noncash 

charitable deductions.2

Congress addressed appraisal-related noncompliance in the Pension 

Protection Act of 2006 (PPA) and the Tax Technical Corrections Act of 

2007 (TTCA). The PPA lowered the thresholds on when IRS should 

consider appraisals misstated, established a civil penalty for preparing a 

misstated appraisal, and set a statutory definition on qualifications for 

appraisers with respect to charitable deductions.3

 TTCA extended the civil 

penalties for misstated appraisals to estate and gift tax valuations.4

Because of your interest in how these laws may have affected tax 

compliance, you asked us to review IRS’s enforcement efforts with 

respect to appraisals. In this report we (1) describe the extent to which 

individual, estate, and gift tax returns are likely to involve appraisers’ 

valuations, the extent to which IRS audits such returns, and the extent to 

which appraiser-specific penalties have been levied; (2) describe how IRS 

selects and staffs returns likely to involve appraisers that it chooses for 

examination, how examiners determine whether an appraisal is accurate, 

and the extent to which IRS uses contractors to provide appraisal 

expertise, as well as assess the usefulness of the current appraisal 

reporting threshold; and (3) assess IRS’s procedures for ensuring that its 

appraisal experts are qualified. 

To identify the extent to which appraisers’ valuations may cause an issue 

for estate and gift tax returns and for returns of individuals making 

noncash charitable contributions, we analyzed IRS Statistics of Income 

(SOI) samples of these three populations of returns for filing years 2007 

through 2009 (for estate and gift tax) and tax years 2005 through 2008 

(for individual returns with noncash contributions).5

 To identify the rate at 

 

2

 United States v. McClain, Civil No. 11-1087 (D.D.C. July 13, 2011) (stipulated order of 

permanent injunction). 

3

 Pub. L. No. 109-280, 120 Stat. 780 (2006). According to the law, qualified appraisers 

must have an appraisal designation from a recognized appraisal organization or meet 

education requirements set by the Secretary of the Treasury, regularly perform appraisals, 

and meet other standards set by the Secretary of the Treasury. IRC §170(f)(11)(E)(ii). 

4

 Pub. L. No. 110-172, 121 Stat. 2473 (2007). 

5

 See app. I for a detailed description of this analysis. We used different time periods 

because of differences in the availability of data from SOI. 
 

Page 3 GAO-12-608 Appraised Values on Tax Returns 

which IRS audits returns with potential issues caused by appraisers and 

the amounts of tax adjustments for appraiser-related cases, we had IRS 

match the cases we analyzed from the SOI sample of taxpayers claiming 

noncash contributions against examination results data available from the 

Examination Operational Automation Database (EOAD), which contains 

information on audit adjustments relating to specific audit issues. Given 

the limitations of the issue coding in the database, we can reliably report 

on adjustments relating to noncash contributions but not specifically 

relating to the appraisal of those contributions. EOAD does not contain 

data for estate and gift tax audits, so we had IRS match the SOI cases for 

those taxes to data from the Enforcement Revenue Information System. 

This process allowed us to reliably determine which returns were audited. 

We calculated confidence intervals for all of our estimates. To report the 

number of appraiser penalties, we consulted with the IRS penalties 

officials who track the penalty created under the PPA. 

To describe how IRS selects and staffs appraisal-related examinations, 

we reviewed IRS staffing and case selection procedures and interviewed 

IRS officials responsible for examination planning. To gather information 

on how IRS audits tax returns with appraisals, we identified through our 

data analysis a random sample of tax year 2008 returns that were likely to 

involve appraisals and that had been audited by IRS. We then reviewed 

the examination files for these cases to identify any inconsistencies 

between stated examination policies in the Internal Revenue Manual

(IRM) and the recorded activities of examiners. To determine the extent of 

contractor use for appraisal-related examinations, we reviewed 

contracting procedures in the IRM and other documentation from IRS. We 

then compiled data from IRS records detailing the use of contractors. 

GAO previously has found IRS’s system for recording contracts to be 

unreliable for financial accounting, but the data was still reliable for 

purposes of this report. To assess how IRS ensures that its appraisal 

experts are qualified, we identified the types of experts IRS uses and 

compared IRS hiring, training, and performance quality review procedures 

with standards that GAO has proffered in the past regarding human 

capital management. We also interviewed officials responsible for staff 

performance quality. 

We determined for the purposes of this review that the data used were 

reliable (see app. I for details on our scope and methodology). We 

conducted this performance audit from October 2010 through June 2012 

in accordance with generally accepted government auditing standards. 

Those standards require that we plan and perform the audit to obtain 

sufficient, appropriate evidence to provide a reasonable basis for our 
 

Page 4 GAO-12-608 Appraised Values on Tax Returns 

findings and conclusions based on our audit objectives. We believe that 

the evidence obtained provides a reasonable basis for our findings and 

conclusions based on our audit objectives. 

The PPA set stricter standards for appraisals and appraiser qualifications, 

established a penalty on appraisers who prepared appraisals that 

improperly supported deductions on income taxes, and lowered the 

threshold for determining certain misstatements of value on certain tax 

returns. 

In terms of noncash charitable contributions, the PPA defined a “qualified 

appraisal” as one that was conducted in accordance with generally 

accepted standards by a “qualified appraiser.”6

 A “qualified appraiser” is 

defined as an individual who has earned an appraisal designation from a 

recognized professional appraiser organization or has met the minimum 

education and experience requirements set forth in the IRS regulations, 

and who regularly performs appraisals for compensation.7

 For individuals, 

noncash charitable contributions are reported on Form 1040, U.S. 

Individual Tax Return, Schedule A, Itemized Deductions, and 

contributions of $500 or more must be itemized on Form 8283, Noncash 

Charitable Contributions. With certain exceptions, taxpayers claiming 

noncash contribution deductions of items or groups of similar items 

exceeding $5,000 must obtain qualified appraisals for the donated 

property, and report those on Form 8283, Section B (see app. II for more 

detail).8

 The provisions concerning qualified appraisals do not apply to 

estate or gift taxes. For those taxes IRS simply requires taxpayers to 

 

6

 I.R.C. §170(f)(11)(E)(i) and §170(f)(11)(E)(ii). There is no single, universally accepted 

set of appraisal standards that apply to every situation in which an appraisal might be 

used, but some professional appraiser associations have adopted standards with similar 

principles, such as a code of ethics, valuation approaches and methods, and guidelines 

for developing appraisal reports. One set of standards is the Uniform Standards of 

Professional Appraisal Practice (USPAP), which an IRS notice on appraisal requirements 

cites as an example. Among other things, the USPAP set ethics and competency rules, 

and established standards for the development of appraisals of real property, personal 

property, and business assets. 

7

 The PPA did not specify what constituted a recognized professional organization, but 

professional associations, such as the American Society of Appraisers and the National 

Association of Certified Valuation Analysts, provide professional training, certification, and 

accreditation programs. 

8

 The $5,000 threshold was established by Congress in 1984. 

Background 
 

Page 5 GAO-12-608 Appraised Values on Tax Returns 

support property values with an appraisal, which could be a written 

appraisal by a professional appraiser, but does not have to be in every 

case.9

 Estate taxes are reported on Form 706 and gift taxes on Form 709 

(see app. II for more detail on how appraisals may appear on these 

forms). In general, the higher the appraised value of a noncash charitable 

contribution, the higher the deduction a taxpayer might claim. Conversely, 

the lower the appraisal for property reported on gifts and estate taxes 

returns, the less tax must be paid. 

IRS has long had the authority to impose a penalty on a taxpayer for 

valuation misstatements included on a return, but prior to the PPA, IRS 

did not have specific authority to impose a penalty on the appraiser who 

prepared the valuation. The penalty rate has two levels related to the 

proportion of the misstatement. The PPA changed the thresholds for the 

two levels and increased the penalty rate for larger misstatements.10 The 

act also added an appraiser penalty, which applies to any person who 

prepared a misstated appraisal and knew or reasonably should have 

known would be used to support an individual income tax return.11 In 

2007, TTCA made the appraiser penalty applicable for appraisals 

improperly supporting estate and gift tax returns. 

The responsibility for identifying cases with appraisals and staffing 

examinations on appraisals largely rests with IRS’s Small Business and 

Self-Employed (SB/SE) Division, which handles complex individual 

returns and gift and estate returns, and its Large Business and 

International (LB&I) Division, which handles partnership returns with 

assets greater than $10 million. Examination of appraisals typically will be 

conducted with field examination techniques.12 Appraiser penalty cases 

are audited separately from the taxpayer examination cases in which IRS 

may have first noticed improper appraisals. 

 

9

 In this report we use “appraisal” to mean a valuation made for estate or gift tax purposes 

by a professional appraiser or a qualified appraisal for purposes of noncash charitable 

contributions. 

10 For more information on how the thresholds changed under the PPA, see app. II. 

11 The penalty on an appraiser would be the lesser of (1) the greater of $1,000 or 10 

percent of the underpayment derived from the misstated appraisal or (2) 125 percent of 

the gross income received by the appraiser for preparing the appraisal. 

12 A field examination typically involves IRS visiting the taxpayers’ place of work or 

residence. 
 

Page 6 GAO-12-608 Appraised Values on Tax Returns 

We estimated that more than 90 percent of estate tax returns filed in 2009 

included assets, deductions, or exclusions of more than $50,000 in 

categories that IRS officials told us were likely to require the use of an 

appraiser.13 In contrast, less than 20 percent of gift tax returns and less 

than 1 percent for individual returns with noncash charitable contributions 

were likely to need an appraiser. For estate tax returns, we estimated that 

the aggregate value of property needing appraisers was at least $75 

billion in 2009. This was greater than for gift or individual tax returns (see 

table 1 and tables 2 through 7 in app. III). 

 

13 When discussing estate and gift taxes, an appraisal is a valuation conducted by a 

professional and may cover a different set of property than an appraisal for noncash 

contributions. A more detailed explanation of how we determined what types of property 

likely involved an appraiser is provided in app. I. 

Appraiser Use Is Most 

Prominent in Estate 

Taxes, Is Associated 

with a Higher 

Probability of Being 

Audited for Gift Tax 

Returns, and Has Led 

to Six PPA Penalties 

Appraisers Play a More 

Prominent Role in the 

Reporting of Estate Taxes 

Than Gift Taxes or 

Individuals’ Noncash 

Charitable Contributions 
 

Page 7 GAO-12-608 Appraised Values on Tax Returns 

Table 1: Estimated Numbers and Percentages of Tax Returns and Value of Property Likely to Involve an Appraiser 

Type of return 

Estimated number

of tax returns likely

to involve an appraisera

Returns likely to involve an 

appraiser as a percentage of 

all returns in that category 

Estimated value of property 

likely to involve an appraiser

Estate tax returns 

(filed in 2009) 30,000 to 32,000 90 to 95 percent $75 billion to $167 billion 

Gift tax returns 

(filed in 2009) 34,000 to 43,000 14 to 19 percent $13 billion to $17 billion 

Returns with noncash charitable 

contributions 

(tax year 2008) Fewer than 76,000 Less than 1 percent Less than $10 billion 

Source: GAO analysis of IRS data. 

Note: Dollar figures have been adjusted for inflation to 2012 dollars using the U.S. GDP deflator. 

a

For estate and gift tax returns we estimated the number of returns with appraisable items of more 

than $50,000 and $25,000, respectively. 

For returns filed in 2007 through 2009, we found that gift tax filers who 

were likely to have needed an appraiser were at least twice as likely to 

have been audited than gift tax filers who were not likely to have needed 

an appraiser.14 Conversely, for estate tax returns we found no statistically 

significant evidence that the likely use of an appraiser was associated 

with a higher probability of being audited. Audit rates for estate tax returns 

(which ranged from 8.1 percent for returns filed in 2007 to 10.1 percent 

for those filed in 2009) are typically significantly higher than those for gift 

tax and individual income tax returns.15

For individual income tax returns for tax years 2005 through 2008, we 

could also not detect any statistically significant differences in audit rates 

based on the likeliness that a Form 8283 filer required a qualified 

appraisal.16 For most years, we found no statistically significant 

differences between the audit rates for taxpayers who claimed at least 

$5,000 worth of noncash deductions from Section B of Form 8283 and 

IRS’s reported audit rates for all individual taxpayers, when compared in 

broad income groups. (For 2007 returns, we found that the audit rate for 

high-income Section B filers was at least 1 percent higher than the rate 

 

14 See app. III, table 9. 

15 See app. III, table 8. 

16 See app. III, table 10. 

The Likelihood of Audits Is 

Associated with Appraisals 

for Gift Tax Returns Being 

Audited but Not for Other 

Returns 
 

Page 8 GAO-12-608 Appraised Values on Tax Returns 

for high-income taxpayers in general). We estimated that the rate of 

individual taxpayer audits that specifically included noncash contributions 

as an issue was 0.5 percent or less for tax year 2008 but as high as 3.7 

percent for tax year 2006.17 The total amount of upwards adjustments in 

tax liabilities associated with appraisals issues (and agreed to by 

taxpayers) was less than $37 million for each year from 2006 to 2008. For 

2005 the amount was between $67 million and $91 million. 

For most of the years we reviewed, the sizes of our subsamples of audits 

that specifically identified noncash contributions as being an issue were 

too small to yield useful information concerning that particular issue’s nochange rate.18 However, in the case of returns filed for tax year 2007 we 

were able to estimate that the no-change rate for noncash contribution 

issues was between 72 percent and 97 percent with a 95 percent level of 

confidence (see app. II, table 12). 

IRS officials said the contributions that some individual taxpayers report 

on their returns are made through partnerships or Subchapter S 

corporations and that those contributions may be reviewed in audits of 

those entities rather than in audits of the individuals’ returns.19 We 

reviewed data for all 121 partnership and S corporation audits involving 

noncash contributions that were referred to the Engineering Program 

(Engineering), a group within LB&I that staffs appraisal experts available 

to examiners for consultation, for assistance in calendar year 2010. We 

found that in 31 of those cases, the value of the contribution was 

identified as an audit issue. Separately, IRS officials told us that from 

2007 through February 2012, 500 individual tax returns were adjusted as 

a result of SB/SE audits of deductions relating to conservation easements 

claimed by these types of entities. 

 

17 See app. III, table 11. 

18 The no-change rate was computed by first estimating (1) the number of cases where 

noncash contributions were included as an issue to be reviewed and (2) the number of 

those cases where an adjustment was made to the contribution and then dividing (2) by 

(1). 

19 Partnerships and S corporations are “pass-through” entities, meaning that they are not 

subject to the corporate income tax. Instead, these entities’ income, deductions, and 

credits are allocated to the partners or shareholders. 
 

Page 9 GAO-12-608 Appraised Values on Tax Returns 

The total amount of PPA penalties assessed in the six existing cases 

where appraiser penalties have been assessed was $159,713, with the 

penalty amounts ranging from several hundred dollars to tens of 

thousands of dollars. An IRS official said that the agency has not abated 

any of the penalties.20

IRS provided several reasons for the first PPA penalties not being levied 

until several years after enactment. First, given that the PPA penalties 

apply to appraisals accompanying returns filed after August 17, 2006, IRS 

officials said that they estimated that returns containing appraisals that 

could be subject to the penalty would not enter the audit stream for a few 

years. Therefore, IRS targeted 2009 to issue guidance and make 

computer system changes. IRS posted a notice about the legislation in 

2006 and on August 18, 2009, issued an interim guidance memorandum 

as initial instructions for examiners on the application of the appraiser 

penalty. This guidance, which was developed by SB/SE and accepted by 

the other divisions of IRS, included procedures to make the penalty 

accessible by examiners and deliver the appropriate appraiser penalty 

assessment notices to appraisers.21 Second, IRS officials said that they 

had to create the computer infrastructure for examiners to apply and 

record penalties, draft and approve the form letters to be sent out to those 

assessed the penalty, and prepare the guidance for IRS examiners in the 

time between the PPA’s passage and the issuance of final guidance on 

the appraiser penalty. A third factor IRS cited was that its examiners 

typically conclude a case against a taxpayer before pursuing a case 

against the appraiser. Figure 1 shows the sequence of events from 

passage of the PPA to the establishment of formal guidance for 

examiners in the IRM. 

 

20 An “abatement” is an IRS decision to cancel or annul a tax assessment or penalty. 

21 IRS guidance also instructs examiners who levy the PPA penalty to alert IRS’s Office of 

Professional Responsibility (OPR) about willful violations of the incorrect appraisals 

provision of PPA. OPR has the authority to impose disciplinary sanctions, such as 

practitioner disbarment and disqualification, against professionals who practice before 

IRS, including appraisers, as described in Circular 230, the IRS publication that 

documents the regulations that professionals must follow to represent taxpayers before 

IRS. 

As of March 2012, IRS Had 

Levied the PPA Penalty on 

Appraisers Six Times 
 

Page 10 GAO-12-608 Appraised Values on Tax Returns 

Figure 1: Events in IRS Development of Appraiser Penalty Guidance, Calendar Years 2006 to 2010 

Application of the appraiser penalty may increase as examiners become 

more familiar with the process of initiating these investigations, according 

to IRS examination officials. They said that traditionally, examiners have 

used other penalties to address appraiser noncompliance. Prior to the 

PPA, IRS could assess penalties on appraisers for promoting abusive tax 

shelters and aiding and abetting tax noncompliance under other sections 

of the Internal Revenue Code.22 IRS officials said that appraisal issues 

have never been significant in penalty cases compared to other promoter 

and preparer violations—officials estimated that maybe 10 or 15 out of 

every 1,000 penalty cases involved appraisals. 

 

22 I.R.C. § 6700; I.R.C. § 6701. 
 

Page 11 GAO-12-608 Appraised Values on Tax Returns 

IRS’s case examination planning and guidance for SB/SE and LB&I field 

exams does not explicitly target appraisals, but current selection methods 

may lead to cases with appraisals indirectly. Examination planners in both 

SB/SE and LB&I use database tools, such as the Audit Information 

Management System and the Examination Returns Control System, to 

manage cases for examination, but these databases do not contain 

variables that would enable exam planning or high-level case selection 

and staffing based specifically on appraisals. Consequently, when 

choosing returns to audit, IRS does not know whether any particular 

return has a related appraisal. For similar reasons, gift and estate returns 

also are not targeted for specific appraisal issues. 

Similarly, IRS does not staff examinations based on appraisals. The 

examiners who lead these teams are generalists and do not necessarily 

have specific expertise relating to appraisal techniques. The presence of 

an appraisal as a potential audit issue does not affect how IRS assigns 

these generalists to specific cases. 

Individual noncash contributions, gift, and estate tax returns with 

appraisals all may be selected for examination indirectly because of 

characteristics that are correlated with appraisals. For example, SB/SE 

field audit priorities focus on high wealth individuals, who are more likely 

to make the kinds of large noncash contributions, give large gifts, or have 

large estates that would include items requiring appraisals. In tax year 

2008 individuals with adjusted gross incomes of $200,000 or more 

accounted for over 75 percent of the noncash contributions of real estate, 

easements, art, and collectibles reported on Forms 8283, even though 

they represented less than 15 percent of individuals filing that form. Other 

SB/SE priorities that may indirectly involve appraisals include abusive 

transactions and special examination projects. Like SB/SE, LB&I does not 

IRS Does Not Target 

or Staff Examinations 

Based on Appraisals, 

but the Current 

Appraisal Threshold 

May Impose 

Unnecessary Burden 

on Taxpayers 

IRS Does Not Choose 

Returns for Examination 

nor Does It Staff Those 

Examinations Based on 

Appraisals 
 

Page 12 GAO-12-608 Appraised Values on Tax Returns 

select cases based on the inclusion of appraisals. LB&I devotes 

resources to priorities set in annual examination plans and then allocates 

the remaining available staff to other work. 

IRS has targeted noncash contributions for audits, which could include 

reviews of appraisals, but the targeting is not based on appraisals. IRS 

selects a portion of its examination inventory using a computerized 

scoring system called the Discriminant Index Function. Within this 

system, the presence of unusual, large, or questionable contributions is 

one of numerous factors that can increase the probability that a return will 

be selected for audit. IRS also has a matching program that compares 

Form 8283 with Form 8282, which includes the amounts donee 

organizations report to have received when they dispose of contributed 

assets. Mismatches between these returns can lead to an examination.23

In addition, one of IRS’s past special examination projects specifically 

targeted deductions relating to façade easements in SB/SE’s North 

Atlantic office, which could have involved reviews of appraisals on the 

easements’ values. The project, which ran from 2008 to 2010, covered 

152 tax returns. As of April 2012, IRS said it has closed 60 cases with an 

average recommended adjustment per return of $252,067.24

Although IRS does not select returns for examination based on 

appraisals, IRS case-review guidance may lead examiners to detect 

appraisal issues once a return has been selected for review for other 

reasons. Different guidance applies to examiners reviewing individual, 

estate, and gift returns. 

 

23 Donees disposing of contributed assets within three years of the date of receipt must 

report contributions on Form 8282, with some exceptions, such as amounts received that 

are less than $500. IRS transcribes Form 8282 annually and electronically matches the 

amounts reported on the form with the total noncash contribution amounts that taxpayers 

report on Forms 1040, Schedule A. If there is a potential tax discrepancy of a certain 

amount the return is classified for potential examination. The classifier manually compares 

each Form 8282 with the corresponding Form 8283 to further audit the discrepancy and 

identify the returns with issues that merit a full examination. 

24 The figures cited here refer only to the returns chosen as part of the special project; IRS 

has audited other returns with façade and conservation easement issues. From 2007 

through February 2012, SB/SE, alone, closed examinations on 3,384 returns reflecting 

deductions relating to conservation easements, which could involve reviews of appraisals. 

Examiners May Determine 

Whether Appraisals Are 

Accurate in the Process of 

Reviewing Returns, but the 

Current Threshold May Be 

Outdated 
 

Page 13 GAO-12-608 Appraised Values on Tax Returns 

The guidance focuses examiner attention on a number of issues involving 

appraisals and related issues, including 

 checking that taxpayers obtained qualified appraisals, if required; 

 verifying that the appraised values of noncash contributions 

exceeding $5,000 are listed in Form 8283, Section B; 

 ensuring that taxpayers attach qualified appraisals for certain assets, 

such as easements registered in historic districts; 

 auditing elements of noncash contributions that seem questionable, 

such as missing, incomplete or altered forms and documents, and 

contributions that seem excessively large compared to reported 

taxpayer income; 

 reviewing any large, unusual or questionable items relating to 

noncash charitable contributions; and 

 reviewing the appraisal supporting donations over a certain amount 

for completeness and issues such as questionable authenticity and 

appraiser judgment. 

IRS officials said that it was up to the judgment of the individual examiner 

to decide whether the potential additional tax to be gained from 

investigating appraisals in detail warrants the investment of audit 

resources. The agency does not require documentation of such 

judgments when the issue has not initially identified for examination. Our 

review of 80 examination files from tax year 2008 with $5,000 or more in 

noncash charitable contributions showed that Forms 8283 were 

incorrectly filled out in 17 cases but the examiner made no change.25 In 

10 of those cases, the examiner did not leave a record explaining why no 

further action was taken; therefore, we could not determine whether the 

examiners made a conscious decision not to follow up on the incorrect 

Forms 8283. In the other seven cases where the Form 8283 was 

incorrect and the examiner left a record, the taxpayers supplied additional 

information during the audit that satisfied the examiners. This shows that 

taxpayers can be compliant with the appraisal rules even when they do 

not fill out Form 8283 correctly. We found no obvious incorrectly reported 

Forms 8283 in the other 63 cases. 

Our file review also suggests that, even in cases where examiners do 

change noncash contribution deductions, few of those changes are due to 

 

25 We define “incorrectly filled out” as the form not having the required signatures from 

appraisers or donees. 

Noncash Charitable 

Contributions on Individual 

Returns 
 

Page 14 GAO-12-608 Appraised Values on Tax Returns 

problems with appraisals. As discussed previously, for tax year 2007, 

examiners made no changes to such deductions in the majority of cases 

in which noncash contributions were identified as a potential problem to 

review. Our file review showed that in only a small percentage of the 

cases in which noncash contributions were changed was the change 

made due to a problem with an appraisal. These facts suggest that IRS is 

not finding widespread noncompliance with appraisals for noncash 

contributions and the potential revenue yield from auditing appraisals of 

lower-value items is likely to be small. At the same time, the number of 

taxpayers who are required to pay for appraisals of items with relatively 

low values (in real, inflation-adjusted terms) has likely increased because 

the $5,000 threshold has not been changed since Congress set it in 1984. 

The threshold would be worth more than $11,000 if adjusted to 2012 

dollars. 

Once IRS selects estate and gift returns for examination, classifiers 

review the returns to identify issues to be audited closely. IRS guidance 

instructs classifiers to review returns in their entirety, including a review of 

any appraisals. IRS estate tax return examiners and managers said that 

estate tax returns can contain voluminous documentation and examiners 

do not have enough time to go through each appraisal and audit every 

possible valuation issue. In cases where valuations are an issue for either 

estate and gift taxes, examiners review the appraisals attached to the 

schedules selected for examination and make referrals to IRS appraisal 

experts in LB&I’s Engineering Department, as needed. If appraisals are 

not attached and should be, examiners contact taxpayers to request 

these. The value of some assets, such as publicly traded stocks, can be 

determined without complex methodologies, using public market 

quotations. Examiners also check appraised values using various tools 

depending on the type of asset. For example, examiners may use “blue 

books” or other resale guides for personal property, and may use various 

computer programs that have comparable-sales values for real estate. 

Gift and Estate Returns 
 

Page 15 GAO-12-608 Appraised Values on Tax Returns 

IRS employs appraisal experts in two areas, Engineering and Art 

Appraisal Services (AAS), which provide valuation assistance to 

examination teams in determining an appraisal’s legitimacy. Engineering, 

as previously mentioned, employs staff appraisers who assist with the 

examination of complex appraisal issues,26 and AAS, part of the Appeals 

Office (Appeals), provides assistance specifically for appraisals of art. 

Under current IRS guidance, examiners should refer cases with 

appraisals above certain thresholds to Engineering and AAS appraisers 

for assistance.27 Estate and gift tax examiners must at a minimum consult 

with Engineering for assistance in determining the accuracy of appraised 

values for examinations where the focus includes appraisal issues. IRS 

guidance also encourages examiners to request the assistance of 

Engineering and AAS experts for cases not requiring mandatory referral, 

if valuation assistance is appropriate.28 Our review of examination case 

files found that examiners made referrals in accordance with the 

guidance. 

 

26 Engineering employs other types of professional experts; however, for purposes of this 

report, references to the Engineering Department or engineers refer only to that group’s 

appraisal experts. 

27 IRS policy requires examiners to refer corporate returns with assets worth $10 million or 

more, and partnership returns with 11 or more partners and gross deductions greater than 

$1 million to Engineering. IRS policy also says that examiners should refer income tax 

returns with a valuation issue of $500,000 or more, and estate and gift tax returns with 

assets valued at $500,000 or more, or with a total tax of $1 million or more, to 

Engineering. IRS policy requires examiners to refer all cases selected for examination with 

art valued at $50,000 or more to AAS for review. 

28 AAS also has access to a group of art experts, the Art Advisory Panel, which assists 

IRS in evaluating taxpayer-submitted art appraisals by reviewing the fair market values for 

art reported on estate, gift, and individual income tax returns. The panel is composed of 

prominent art experts, including museum directors, curators, and scholars. The panel 

makes recommendations on the acceptability of the submitted appraisals, and if it judges 

them to be unacceptable, makes alternative valuation recommendations for the art pieces. 

Following review by AAS, the Art Advisory Panel’s recommendations on the value of 

appraised art property may become the position of IRS. 

Examiners Working on 

Appraisal Issues Have 

Access to In-house IRS 

Appraisal Experts and 

Outside Contractors for 

Assistance 
 

Page 16 GAO-12-608 Appraised Values on Tax Returns 

In addition to their internal sources of appraisal expertise, IRS 

examination teams also may seek outside contracts with professional 

appraisal experts to assist in reviewing taxpayers’ property valuations. 

IRS entered into 23 contracts involving cases of noncash contributions, 

gift or estate taxes from fiscal years 2005 to 2011. The total amount 

awarded for the 23 contracts on noncash contributions, gift and estate 

taxes was $1.1 million, an average of $46,000 per contract. An IRS 

procurement official said that each contract may cover appraisal services 

for multiple properties. IRS officials said that it is more economical to hire 

outside appraisal experts who have expertise with certain types of assets, 

such as easements, than to have many in-house experts in highly 

specialized areas because the appraisal caseload in such areas would 

not support full-time staff. IRS policy requires examination teams to 

consider the availability and expertise of in-house appraisers prior to 

requesting the assistance of outside experts. 

In our previous work on human capital management, we listed factors for 

ensuring high-performance human capital management and ensuring 

high program quality.29 Standards from our past work that are relevant to 

our review of IRS’s appraiser qualifications include 

 having a process suitable to hire qualified staff to audit appraisals, 

including specifically requiring appraisal expertise as a qualification; 

 formally training and educating its staff to keep up with job duties and 

individual developmental needs relevant to evaluating or auditing 

appraisals; and 

 ensuring that staff are performing quality work during their 

examinations of appraisals, including a quality review system that 

covers appraisal skills and management oversight that evaluates 

appraisal skills. 

Engineering fully followed GAO’s three standards for ensuring qualified 

staff; however, while AAS fully met the hiring standard, it did not meet the 

other two, creating risk that staff may not be performing quality work. 

 

29 See GAO, Human Capital: A Self-Assessment Checklist for Agency Leaders, 

GAO/OCG-00-14G (Washington, D.C.: Sept. 1, 2000). 

IRS Entered into 23 

Outside Contracts for 

Noncash Contributions, 

Estate or Gift Tax 

Examinations Involving 

Appraisals from 2005 to 

2011 

IRS Follows Accepted 

Standards When 

Hiring Qualified 

Appraisal Staff, but 

Gaps Exist in Training 

and Performance 

Evaluation for the Art 

Appraisal Service 
 

Page 17 GAO-12-608 Appraised Values on Tax Returns 

Engineering: The job description for appraisers in Engineering 

specifically requires applicants to have valuation and appraisal skills as a 

qualification, meeting the hiring standard. For example, the description 

says appraisers must have a “mastery of appraisal principles and 

concepts needed to serve as a technical authority.” The hiring process 

then works through a combination of automated scoring and personal 

review suitable for hiring appraisers. Announced appraiser positions 

follow the Office of Personnel Management category for appraisers, 

series GS-1171. An automated scoring system called Career Connector 

assesses applicants’ qualifications. IRS then hires from among the 

qualified applicants. 

AAS: The qualifications and hiring process for appraisers for AAS is 

similar to the procedure used by the Engineering and thus, AAS meets 

the standard. 

Engineering: IRS maintains a formal training program for its Engineering 

appraisers that starts with new hires and continues with advanced, 

specialized training, including training on appraisal skills to meet the GAO 

training standard. The IRM specifies two appraisal organizations—the 

American Society of Appraisers and the Appraisal Institute—that may 

acceptable continuing education. LB&I has brought in trainers for some 

courses and maintains a budget for engineers to seek outside training, as 

well. Internal engineering training documents also state that engineers 

may develop a learning plan that includes 40 hours of training every year. 

AAS: Appeals requires 24 to 40 hours of continuing education per year 

for its employees, including its AAS staff, but it does not explicitly identify 

appraisal skills as a subject for training, preventing it from meeting the 

standard. Some AAS staff members have attended conferences on visual 

arts and the law and the American Society of Appraisers National 

Conference, which appear relevant to their work. However, in contrast to 

the standard of providing training relevant to specific job duties, the 

Appeals training guidance does not mention any relevant skills that 

appraisers must maintain, leaving the possibility that appraisers are not 

keeping up their skills and not evaluating art appraisals as well as they 

could. AAS staff have discussed a more specific training program for AAS 

new hires. 

Hiring 

Training 
 

Page 18 GAO-12-608 Appraised Values on Tax Returns 

Engineering: LB&I meets the GAO standard for monitoring performance 

quality with respect to its engineering group by subjecting its work to a 

quality review system and exercising management oversight of appraisal 

skills. LB&I uses an audit quality assurance system as part its LB&I 

Quality Measurement System. Having such a system enables IRS to 

improve procedures and issue development. 

In LB&I’s quality assurance system, engineers are measured on four 

technical standards. The four technical standards focus on the following 

subjects 

 planning; 

 inspecting and fact finding; 

 development, proposal, and resolution of issues; and 

 workpapers and reports. 

Each of the technical standards includes a list of specific criteria. The 

correct auditing of an appraisal is not specifically covered by the 

standards. However, to the extent that an examination involved an 

appraisal, an engineer’s work on the case would be covered under these 

four standards. For example, IRM guidance suggests procedures that an 

engineer should gather facts. Such a procedure would apply to gathering 

facts on an appraisal and would be checked during a quality review. To 

conduct the quality assurance reviews, LB&I randomly selects 

coordinated industry cases (CIC) and industry cases (IC).30 The results 

are reported in quarterly reports. In the first quarter of fiscal year 2011, 

five CICs covered engineers and three ICs covered engineers. None of 

the problems directly involved reviews of appraisal issues, but the 

assessments found problems relating to two of the technical standards on 

CICs and problems relating to three standards for ICs. On a more routine 

basis, team managers are required to review case performance, including 

technical aspects of an engineer’s work. 

AAS: Appeals operates a case-review program called the Appeals 

Quality Measurement System (AQMS);31 however, most of the cases that 

AAS works are not Appeals cases and are not covered by this system. 

 

30 The CICs cover only those reviews that exceed planned staff days by 25 percent. 

31 AQMS is a system used by Appeals management that randomly selects closed cases 

to review the quality of Appeals’ work in the aggregate, not employee performance. 

Performance Quality 

Review and Management 

Oversight 
 

Page 19 GAO-12-608 Appraised Values on Tax Returns 

Therefore, IRS does not meet the GAO quality review standard with 

respect to AAS. Given that AAS is involved in only a small percentage of 

the cases that are appealed, IRS’s Director of Tax Policy and Valuation 

said that she has been considering whether to supplement AQMS’s 

random sample with a periodic, targeted review of AAS cases. She said 

IRS’s goal is to start the reviews in fiscal year 2013. Aside from AQMS, 

IRS guidance encourages examination offices to provide feedback on 

AAS’s performance that “would be beneficial to the viability of this 

program.” The AAS manager also reviews all cases that AAS completes 

before they are issued.32 However, there is no group-wide summation or 

tracking of these reviews or assurance that AAS staff are performing well 

specifically in regard to their appraisal work, as stipulated by the 

standard. Without systematic evaluation, erosion of the quality of AAS’s 

work could occur unobserved. 

Appraisers play a large role in the amount of tax reported on estate 

returns, but have less pronounced effects on gift and individual tax 

returns. Although IRS does not specifically target tax returns that involve 

appraisals, the policies and procedures that IRS has in place to audit 

estate, gift, and individual income tax returns ensures some coverage of 

returns that do involve appraisals. For example, IRS already gives priority 

to higher-income individual returns in the examination selection process, 

and such returns are more likely to have appraisals supporting noncash 

contributions than the general population of returns. 

There are two areas where changes might lead to reduced taxpayer 

burden or improved agency performance relating to appraisals. First, the 

fact that the $5,000 threshold at which taxpayers are required to obtain 

qualified appraisals for noncash contributions has remained unchanged 

for more than 25 years means that some contributors today must hire 

appraisers to value property that would not have needed appraisals in the 

mid-1980s, when the threshold was adopted. The high no-change rate 

that we found through our data analysis and our file review indicates that 

IRS examiners find relatively little noncompliance relating to appraisals for 

noncash contributions. This low rate of detected noncompliance implies 

that very little revenue is gained by auditing appraisals of assets worth 

 

32 IRS Appeals officials also said that they consider the Art Advisory Panel an additional 

layer of quality review, as the panel reviews AAS work. 

Conclusions 
 

Page 20 GAO-12-608 Appraised Values on Tax Returns 

less than $10,000. Consequently, there seems to be little risk in adjusting 

the threshold for price inflation to better reflect the level Congress initially 

believed was appropriate to deter noncompliance. This adjustment would 

reduce the compliance burdens for contributors of such property and, if 

similar adjustments were made periodically in the future, would serve to 

maintain consistent treatment of taxpayers over time. Second, the lack of 

appraisal training requirements for AAS appraisers and the lack of a 

comprehensive quality control process for AAS cases put the quality of 

potentially high-value appraisal cases involving art at risk. 

To better ensure the quality of IRS’s examination of appraisal issues, the 

Commissioner of Internal Revenue should take the following two actions: 

 ensure that a more comprehensive quality review system for work 

performed by AAS staff is implemented and 

 develop more specific and documented appraisal training 

requirements for AAS staff, as LB&I has done for engineers. 

To reduce the compliance burden on taxpayers making noncash 

contributions, Congress should consider raising the threshold at which 

taxpayers are required to have qualified appraisals for a particular 

contribution. Raising the threshold and giving IRS the authority to adjust 

this value for inflation in the future would maintain the consistent 

treatment of taxpayers over time. 

We requested written comments from the Commissioner of Internal 

Revenue and received a letter from the IRS Deputy Commissioner for 

Services and Enforcement on June 1, 2012 (which is reprinted in app. IV). 

IRS agreed with our recommendations. First, it agreed that a more 

comprehensive quality review process is appropriate for AAS, adding that 

IRS’s goal is to supplement AQMS’s random sample with a periodic, 

targeted review of AAS cases starting in fiscal year 2013. Additionally, 

IRS agreed that more specific appraisal training should be provided, 

adding that it is finalizing a more specific training curriculum for AAS 

appraisers. IRS also provided technical comments, which we 

incorporated into our draft. 

Recommendations for 

Executive Action 

Matter for 

Congressional 

Consideration 

Agency Comments 
 

Page 21 GAO-12-608 Appraised Values on Tax Returns 

As agreed with your offices, unless you publicly announce the contents of 

this report earlier, we plan no further distribution until 30 days from the 

report date. At that time, we will send copies to interested congressional 

committees, the Secretary of the Treasury, the Commissioner of Internal 

Revenue, and other interested parties. In addition, the report also will be 

available at no charge on the GAO website at http://www.gao.gov. 

If you or your staff have any questions about this report, please contact 

me at (202) 512-9110 or whitej@gao.gov. Contact points for our Offices 

of Congressional Relations and Public Affairs may be found on the last 

page of this report. GAO staff who made major contributions to this report 

are listed in appendix V. 

James R. White 

Director, Tax Issues 

Strategic Issues 
Appendix I: Scope and Methodology 

Page 22 GAO-12-608 Appraised Values on Tax Returns 

This appendix provides further details on the methodologies that we used 

to estimate (1) the extent to which appraisals are an issue for estate and 

gift tax returns and for returns of individuals making noncash charitable 

contributions and (2) the rates at which the Internal Revenue Service 

(IRS) audits returns with potential appraisal issues. It also explains how 

we identified cases for our file review and how we obtained data on IRS’s 

use of contractors. 

The purposes of this section are to document (1) how we have placed the 

various assets, exclusions, and deductions reported on Forms 706 into 

three groups based on the likeliness that a substantial appraisal was 

needed to value a particular item and (2) how we identified specific estate 

tax returns as being likely to have involved a substantial appraisal.1

 Data 

for this analysis came from the Statistics of Income (SOI) estate tax 

samples for filing years 2007 through 2009 (the latest years available at 

the time of our analysis). After identifying these various subgroups of 

taxpayers, we used their taxpayer identification numbers to extract data 

from the Enforcement Revenue Information System (ERIS) regarding any 

examinations they underwent for the tax years included in our scope. We 

converted all dollar amounts into 2012 dollars by multiplying them by the 

ratio of the 2012 index value for the gross domestic product (GDP) price 

deflator over the index value for the applicable year of death. 

IRS technical advisors for estate and gift tax examinations identified the 

following assets, deductions or exclusions as being likely to involve an 

appraiser. 

 Retirement plans 

 Personal residences 

 

1

 For purposes of the estate and gift tax components of our analysis, we define “appraisal” 

to mean any method used to support the value of an asset, exclusion, or deduction on an 

estate or gift tax return (this definition should not to be confused with the use of “qualified 

appraisal” in reference to noncash charitable contributions, which has a more specific 

legal meaning). We then further break down the term “appraisal” supporting an estate or 

gift tax return into two categories: simple and substantial. A simple appraisal consists of 

unsophisticated comparisons that would support the value of an asset, exclusion or 

deduction—such as referring to statements from a financial institution or to a published 

price for financial assets. A “substantial appraisal” involves a professional or independent 

expert using specialized knowledge or professional appraisal techniques to support an 

asset’s value. 

Appendix I: Scope and Methodology 

Estate Tax 

Identifying Assets, 

Deductions, and 

Exclusions Likely to 

Involve a Substantial 

Appraisal 
Appendix I: Scope and Methodology 

Page 23 GAO-12-608 Appraised Values on Tax Returns 

 Improved real estate 

 Undeveloped land 

 Real estate partnerships 

 Closely held stock 

 Farm assets and farm land 

 Private equity and hedge funds 

 Other limited partnerships 

 Other non-corporate businesses 

 Art 

 Depletable/intangible 

 Family limited partnership, tax value 

 Conservation easements 

The IRS technical advisors identified the following items that are included 

in the SOI dataset as being unlikely to involve an appraiser. 

 Cash 

 Publicly traded stock 

 Real estate mutual funds 

 Federal, state, local, corporate, and foreign bonds and bond funds 

 Other mutual funds 

 Insurance, face value 

 Insurance, policy loans 

 Funeral expenses 

 Executors’, attorneys’, and accountants’ commissions and fees 

 Schedule L and K debts and mortgages 

The following categories contain assortments of assets or deductions that 

cannot be individually identified as being likely or unlikely to involve 

appraisers. 

 Other assets 

 Mortgages and notes 

 Other expenses and losses 

 Bequests to surviving spouse 

 Qualified terminable income property 

 Charitable bequest deduction 
Appendix I: Scope and Methodology 

Page 24 GAO-12-608 Appraised Values on Tax Returns 

We identified “returns with over $50,000 in any asset, deduction, or 

exclusion category likely to involve an appraiser” as those cases with 

more than $50,000 (in absolute value) in any category from the list of 

property likely to involve an appraiser above. We identified “returns with 

no more than $50,000 in every asset, deduction, or exclusion category 

likely to involve an appraiser” as those cases with no more than $50,000 

(in absolute value) in any category listed in either the first or third lists of 

property above. 

We identified taxable estates as those with positive values for net estate 

tax. We defined the “buffer” before an estate would become taxable as 

the amount by which total gross estate less exclusion would have to 

increase or total deductions would have to decrease (holding credits 

constant) before an estate would become taxable. In other words, if a 

taxpayer has a buffer of $100,000, it would take some combination of 

increases in asset valuations or decreases in the value of exclusions and 

deductions summing to more than $100,000 before any exam 

adjustments would result in a tax increase. 

We asked IRS to extract selected data from the ERIS database for the 

sample of estate taxpayers we identified from the SOI data. We counted 

any case that had a match in ERIS as having been audited. 

The methodology that we used for the gift tax is similar to the one that we 

used above for the estate tax. The principal differences are that, first, we 

use a lower dollar limit ($25,000 rather than $50,000) in some of our 

comparisons because the size of the average gift is significantly smaller 

than the size of the average estate, and, second, we do not distinguish 

between taxable and nontaxable gift tax returns. (Many gift tax returns are 

not taxable; however, the amounts reported on these returns can 

ultimately affect the amounts of tax paid on estate tax returns.) The data 

used for this analysis come from SOI’s sample of gift tax returns filed in 

2007 through 2009, the latest available at the time of our analysis. The 

property and deduction categories recorded from these returns are 

slightly different from those recorded from the estate tax returns. We 

converted all dollar amounts into 2012 dollars by multiplying them by the 

ratio of the 2012 index value for the GDP price deflator over the index 

value for the applicable gift year. 

Identifying Returns Likely 

or Unlikely to Have Had at 

Least $50,000 in at Least 

One Category of Assets, 

Deductions, or Exclusions 

That Would Have Required 

the Involvement of an 

Appraiser 

Determining Taxability and 

the Buffer before 

Taxability Begins 

Extracting Exam Data 

from ERIS 

Gift Tax 
Appendix I: Scope and Methodology 

Page 25 GAO-12-608 Appraised Values on Tax Returns 

IRS technical advisors for estate and gift tax examinations identified the 

following gifts as being likely to involve an appraiser. 

 Retirement plans 

 Personal residence 

 Real estate, improved 

 Undeveloped land 

 Real estate partnerships 

 Closely held stock 

 Farm assets and farm land 

 Private equity and hedge funds 

 Other limited partnerships 

 Other non-corporate businesses 

 Art 

 Depletable/intangible 

The IRS technical advisors identified the following gifts that are included 

in the SOI dataset as being unlikely to involve an appraiser. 

 Cash 

 Publicly traded stock 

 Federal, state, local, corporate, and foreign bonds and bond funds 

 Real estate mutual funds 

 Other mutual funds 

 Insurance, face value 

 Insurance, policy loans 

 Loans on personal residence 

 Loans on other real estate 

 Futures and commodities 

 Annuities 

 Nominal gifts 

The following categories contain assortments of gifts that cannot be 

individually identified as being likely or unlikely to involve appraisers. 

 Mortgages and notes 

 Other assets 

 Adjustments 

 Gifts to other donees 

Identifying Gifts Likely to 

Involve a Substantial 

Appraisal 
Appendix I: Scope and Methodology 

Page 26 GAO-12-608 Appraised Values on Tax Returns 

To estimate the extent to which appraisals are used to support noncash 

contributions, we first reviewed IRS requirements for recording appraisals 

on Form 8283, Noncash Charitable Contributions. Next, we used data 

from SOI’s annual studies of noncash contributions relating to the 

amounts and types of contributions that taxpayers reported on various 

parts of Form 8283 from tax years 2005 through 2008 (the latest years 

available at the time of our analysis) to (1) identify an upper bound for the 

number of taxpayers who potentially required qualified appraisals to 

support noncash contribution deductions claimed on Form 1040, 

Schedule A, Line 17, and (2) determine how many Form 8283 filers we 

could identify as either being likely to require a qualified appraisal or 

unlikely to require one. Filtering the SOI data involved the following steps. 

Qualified appraisals are not required for any donations reported in 

Section A of Form 8283; therefore, we excluded Form 8283 filers who did 

not report any contributions in Section B of the form. Furthermore, if a 

taxpayer reports a donation in Section B but does not carry any amount to 

Schedule A of the Form 1040, the taxpayer is not actually claiming any 

deduction for that donation. Consequently, we excluded all filers that did 

not have a positive value for the amount carried from Section B to 

Schedule A for any donation. 

Taxpayers should not need a qualified appraisal if either of the following 

two conditions is met: the total amount moved from Section B to Schedule 

A for all donations is less than or equal to $5,000, or the only type of 

donation reported in Section B is intellectual property. We removed all 

such cases. 

SOI assigns each donation reported in Form 8283 Section B to one of 19 

different property-type categories. Donations in five of these categories 

(real estate except conservation easements, land, conservation 

easements, façade easements, and art and collectibles) need qualified 

appraisals unless they come from a business’s stock in trade, inventory, 

or property held primarily for sale to customers in the ordinary course of 

its trade or business. We believe that this exception is not likely to apply 

to properties in the first four of these five categories. 

Noncash Charitable 

Contributions 

Excluding Filers Who Did 

Not Claim Any Deductions 

for Donations Reported in 

Section B of Form 8283 

Excluding Certain 

Additional Taxpayers Who 

Reported Amounts in 

Section B but Should Not 

Have Needed Qualified 

Appraisals 

Classifying the Remaining 

Form 8283 Filers for 

Reporting Purposes 

According to the Likeliness 

of Their Needing a 

Qualified Appraisal 
Appendix I: Scope and Methodology 

Page 27 GAO-12-608 Appraised Values on Tax Returns 

To identify donations of art and collectibles that potentially could have 

qualified for the exception, we did the following: 

1. For those filers who made a donation in this category, we used data 

from SOI’s 1040 tax files to determine whether they had a Schedule 

C2

 business in any of the following listed industry: 3

 Art dealers 

 Independent artists 

 Jewelry stores 

 Jewelry, watch, etc., wholesalers 

 Beverage and tobacco product manufacturing (wineries are 

included in this category) 

 Beer, wine, and liquor stores 

 Beer, wine and distilled spirits wholesalers 

2. We assigned any of these filers that had at least one Schedule C in 

one of these industries a code that indicates that they potentially had 

an exception. 

Donations in two property categories, corporate stock and mutual funds, 

are excepted from needing qualified appraisals if they have readily 

available market quotations or are less than $10,000. This exception can 

also apply to securities, such as bonds, that are reported in the “other 

securities and investments” category. We had no way of reliably 

identifying which of the securities in these categories had readily available 

quotations, so we did not attempt to identify individual donations as being 

excepted or not. However, within the “securities and other investments” 

category, we did identify bond donations using the taxpayers’ descriptions 

of their donations on line 5(a) and assigned them a code indicating that 

they were potentially excepted, which distinguished them from other 

donations in that category that were not excepted. 

 

2

 Individual taxpayers who have income or losses from businesses that they operate or 

from professions they practice must report the income or loss on Schedule C of Form 

1040. 

3

 Given that we are concerned only with individual taxpayers, the only types of business 

inventories relevant to these deductions would be those of sole proprietorships (Schedule 

C) or partnerships. To the extent that any of the filers in our sample made only excepted 

contributions of inventories through a partnership our results will overstate the number of 

taxpayers requiring a qualified appraisal. 
Appendix I: Scope and Methodology 

Page 28 GAO-12-608 Appraised Values on Tax Returns 

Donations in the categories that do not involve securities may qualify for 

the inventory exceptions, and vehicle donations can be excepted under 

additional special conditions. Aside from the “other and unknown” 

category, donations in the nonsecurities categories, taken individually, 

account for very small shares of the total value of noncash contribution 

deductions. The “other and unknown” category accounts for about 6 

percent to about 9 percent of the total value of deductions, depending on 

the year. In some of these cases the type of property donated is truly 

unknown because the description simply indicates that the donation was 

made by a partnership owned by the taxpayer. The remaining donations 

are of such variety that it would be difficult to apply the approach that we 

have set out above for identifying donations that potentially qualified for 

the inventory exception. 

After we completed all of steps described above, we grouped Form 8283 

filers into the following categories: 

1. Filers who had a donation in at least one of the following property 

categories: 

 Real estate (except conservation easements) 

 Land 

 Conservation easements 

 Façade easements 

 Other securities and investments (excluding donations of bonds) 

 Art and collectibles (excluding donations identified as potentially 

qualifying for the inventory exception) 

2. Filers who had donations only in one of the following property 

categories: 

 Corporate stock 

 Mutual funds 

 Bonds 

3. All remaining filers with Section B donations that did not meet the 

criteria for the first two categories. 

Filers in the first category, on average, are more likely to have appraisals 

than those in the other two categories; filers in the second category, on 

average, are less likely to have appraisals than those in the other two 

categories. We converted all dollar amounts into 2012 dollars by 

multiplying them by the ratio of the 2012 index value for the GDP price 

deflator over the index value for the applicable tax year. 
Appendix I: Scope and Methodology 

Page 29 GAO-12-608 Appraised Values on Tax Returns 

We asked IRS to extract selected data from the Examination Operational 

Automation Database (EOAD) for the sample of taxpayers that SOI had 

identified as having made noncash contributions. We counted any case 

that had a match in EOAD as having been audited. We identified cases 

as having had noncash contributions raised as an audit issue based on 

the form and line codes plus the Standard Accounting Identification 

Number recorded in that database. Given the limitations of the issue 

coding in the database, we can report on adjustments relating to noncash 

contributions but not specifically relating to the appraisals of those 

contributions. We identified audits in which noncash contributions were an 

issue as having been no-change cases if the agreed adjustment amount 

for that issue was zero. We used the results of our data matching for tax 

year 2008 to identify the cases for which we requested examination files 

to review. We reviewed the cases using a data collection instrument at 

IRS’s New Carrollton, Maryland, office. 

We conducted this performance audit from October 2010 through June 

2012 in accordance with generally accepted government auditing 

standards. Those standards require that we plan and perform the audit to 

obtain sufficient, appropriate evidence to provide a reasonable basis for 

our findings and conclusions based on our audit objectives. We believe 

that the evidence obtained provides a reasonable basis for our findings 

and conclusions based on our audit objectives. 

Obtaining Data on Audit 

Rates and Audit Issues 
Appendix II: Appraisal Reporting 

Requirements for Noncash Contributions and 

Gift and Estate Taxes 

Page 30 GAO-12-608 Appraised Values on Tax Returns 

IRS has established rules and procedures for taxpayers to follow when 

using appraisals to support noncash charitable contributions, estate, and 

gift tax claims. 

Within certain conditions, taxpayers must use qualified prepared 

appraisals to support noncash-contribution deductions on Form 1040, 

Schedule A. Taxpayers list the total value of noncash contributions on 

Schedule A, line 17. Taxpayers claiming noncash charitable contributions 

over $500 must submit Form 8283, Noncash Charitable Contributions, 

which has two sections. In Section A of the form, taxpayers report 

noncash contributions that do not require qualified appraisals. Such 

contributions include items, or groups of similar items,1

 with a claimed 

deduction of $5,000 or less, and securities of any value with readily 

available market quotations.2

 For contributions more than $5,000, 

taxpayers must have an appraisal done and fill out Section B of Form 

8283. Exceptions to the $5,000 threshold include 

 nonpublicly traded stock of $10,000 or less; 

 vehicles if the deduction is limited to gross proceeds from sale; 

 intellectual property; 

 certain securities considered to have market quotations readily 

available; 

 inventory and property donated by corporations that are “qualified 

contributions” for the care of the ill or infants; and 

 stock in trade, inventory, or property held primarily for sale to 

customers. 

Figure 2 shows the section of Form 8283 where taxpayers provide 

descriptions and appraised values of donated property valued at more 

than $5,000. Taxpayers are required to attach the written appraisals to 

the return only for contributions of art valued at $20,000 or more, any 

deduction of more than $500,000, contributions of easements on 

buildings in historic districts, and deductions of more than $500 for 

clothing and household items not in good use condition. Charitable 

 

1

 Similar items are those that fall under the same category or type, such as paintings, coin 

collections, jewelry, buildings, and nonpublicly traded stocks. 

2

 Securities with restrictions, even if they have readily available market quotations, may 

require qualified appraisals. 

Appendix II: Appraisal Reporting 

Requirements for Noncash Contributions and 

Gift and Estate Taxes 

Noncash Charitable 

Contributions 
Appendix II: Appraisal Reporting 

Requirements for Noncash Contributions and 

Gift and Estate Taxes 

Page 31 GAO-12-608 Appraised Values on Tax Returns 

organizations that receive contributions listed in Section B of Form 8283 

generally must report them to IRS on Form 8282. 

Figure 2: Form 8283, Section B, Part I, Reporting Instructions for Noncash Charitable Contributions over $5,000 
Appendix II: Appraisal Reporting 

Requirements for Noncash Contributions and 

Gift and Estate Taxes 

Page 32 GAO-12-608 Appraised Values on Tax Returns 

IRS requires that taxpayers support the claimed value of property in 

estate transfers with an appraisal, which could be a written appraisal by a 

professional appraiser, but does not have to be in every situation. The 

body of law covering qualified appraisals for noncash charitable 

contributions does not apply to estate or gift taxes. Taxpayers may owe 

taxes on the property of an estate transferred at death, if the gross value 

of the estate exceeds annually established exclusion levels. The 

exclusion levels for the estates of those who died in certain recent years 

were $1.5 million for 2004 to 2005, $2 million for 2006 to 2008, 

$3.5 million for 2009, and $5 million for 2010 to 2012. Following 

taxpayers’ deaths, appointed estate executors file estate returns on Form 

706, United States Estate (and Generation-Skipping Transfer) Tax Return 

if the estate is worth more than the annual exclusion. Appointed 

executors must include explanation or documentation detailing how the 

value of estate property was determined. Written appraisals prepared by 

professional appraisers are one of the acceptable valuation methods, and 

appropriate documentation will vary depending on the type of asset. 

However, written appraisals are required to support the value of real 

property claimed in Schedule A-1, artwork or collectibles worth more than 

$3,000 individually or more than $10,000 collectively claimed in Schedule 

F, and conservation easement exclusions reported in Schedule U. 

Taxpayers may be subject to taxes on property transferred as gifts and 

must provide valuation support for the property’s claimed value. Gifts may 

be taxable if their value exceeds annually established exclusion values. 

The exclusion levels for gift transfers in recent years were $10,000 from 

1998 to 2001, $11,000 from 2002 to 2005, $12,000 from 2006 to 2008, 

and $13,000 from 2009 to the present. Gift donors file gift returns on 

Form 709, United States Gift (and Generation-Skipping Transfer) Tax 

Return, if gifts exceed the exclusion value. Donors must list taxable gifts 

in Schedule A and include one of a number of acceptable valuation 

documents, among them a written appraisal prepared by a professional 

appraiser, or an explanation of how the value was determined. For 

calendar year 2007, IRS recorded 257,485 donors who transferred 

$45.2 billion in gifts. Less than 4 percent of all gift returns were taxable, 

accounting for $2.8 billion in gift taxes. Three types of assets—cash, 

stock, and real estate—accounted for 87 percent of all gifts. 

Estate Tax Returns 

Gift Tax Returns 
Appendix II: Appraisal Reporting 

Requirements for Noncash Contributions and 

Gift and Estate Taxes 

Page 33 GAO-12-608 Appraised Values on Tax Returns 

For noncash charitable contributions, the Pension Protection Act (PPA) of 

2006 lowered the threshold for substantial valuation misstatements from 

200 percent of the correct valuation to 150 percent. Substantial valuation 

misstatements subject the taxpayer to a penalty equal to 20 percent of 

the underpayment attributable to the misstatement. For estate and gift 

property, PPA increased the threshold for substantial valuation 

understatements from 50 percent to 65 percent. Gross valuation 

misstatements on any return are subject to an increased penalty equal to 

40 percent of the portion of the underpayment attributable to the 

misstatement. For noncash charitable contributions, PPA lowered the 

threshold for gross valuation misstatement from 400 percent of the 

correct valuation to 200 percent. For estate or gift property, PPA raised 

the threshold for gross valuation understatements from 25 percent to 40 

percent of the supported value. 

Penalty Thresholds 

and Valuation 

Misstatements 
Appendix III: Tables on Appraisal Usage and 

IRS Appraisal Enforcement 

Page 34 GAO-12-608 Appraised Values on Tax Returns 

Tables 2 through 12 contain data on appraisal usage and IRS’s appraisal 

enforcement. 

Table 2: Number of Estate Tax Returns Filed in 2007 through 2009, by Likeliness of Having a Valuation Done by an Appraiser 

In thousands 

Estimate

Lower bound 

of 95 percent 

confidence interval 

Upper bound

of 95 percent

confidence interval

Estate tax returns filed in 2009a

Returns with over $50,000 in any asset, deduction, or exclusion 

category likely to involve an appraiser 30.5 30.2 30.8

Returns with no more than $50,000 in every asset, deduction, or 

exclusion category likely to involve an appraiser 0.9 0.7 1.2

Returns that could not be classified into either of the preceding 

groups 0.8 0.6 1.0

Estate tax returns filed in 2008 

Returns with over $50,000 in any asset, deduction, or exclusion 

category likely to involve an appraiser 34.8 34.6 35.1

Returns with no more than $50,000 in every asset, deduction, or 

exclusion category likely to involve an appraiser 1.0 0.9 1.2

Returns that could not be classified into either of the preceding 

groups 1.2 1.0 1.4

Estate tax returns filed in 2007 

Returns with over $50,000 in any asset, deduction, or exclusion 

category likely to involve an appraiser 34.0 33.7 34.3

Returns with no more than $50,000 in every asset, deduction, or 

exclusion category likely to involve an appraiser 1.4 1.2 1.6

Returns that could not be classified into either of the preceding 

groups 1.4 1.2 1.6

Source: GAO analysis of IRS data. 

a

IRS reports that 33,515 estate tax returns were filed in 2009; 38,354 in 2008; and 38,000 in 2007. 

Appendix III: Tables on Appraisal Usage and 

IRS Appraisal Enforcement 
Appendix III: Tables on Appraisal Usage and 

IRS Appraisal Enforcement 

Page 35 GAO-12-608 Appraised Values on Tax Returns 

Table 3: Absolute Value of Assets, Deductions, and Exclusions Reported on Estate Tax returns, by Likeliness of Having a 

Valuation Done by an Appraiser 

Dollars in billions 

Estimate

Lower bound 

of 95 percent 

confidence interval 

Upper bound

of 95 percent

confidence interval

All items reported in 2009 $257.0 $255.0 $259.0

Items likely to involve an appraiser 76.8 75.6 78.1

Items unlikely to involve an appraiser 93.2 92.0 94.5

Items for which appraiser involvement is indeterminable 86.9 85.2 88.5

All items reported in 2008 $294.3 $292.6 $296.1

Items likely to involve an appraiser 87.0 85.8 88.1

Items unlikely to involve an appraiser 109.7 108.6 110.8

Items for which appraiser involvement is indeterminable 97.7 96.3 99.1

All items reported in 2007 $278.4 $276.6 $280.2

Items likely to involve an appraiser 83.0 81.8 84.2

Items unlikely to involve an appraiser 104.8 103.6 106.0

Items for which appraiser involvement is indeterminable 90.6 89.1 92.1

Source: GAO analysis of IRS data. 

Note: Dollar figures have been adjusted for inflation to 2012 dollars using the U.S. GDP deflator. 

Detail may not sum to total because of rounding. 
Appendix III: Tables on Appraisal Usage and 

IRS Appraisal Enforcement 

Page 36 GAO-12-608 Appraised Values on Tax Returns 

Table 4: Number of Gift Tax Returns Filed in 2007 through 2009, by Likeliness of Having a Valuation Done by an Appraiser 

In thousands 

Estimate

Lower bound 

of 95 percent 

confidence interval 

Upper bound

of 95 percent

confidence interval

Gift tax returns filed in 2009a

Returns with over $25,000 in any gift, deduction, or exclusion 

category likely to involve an appraiser 38.2 34.2 42.2

Returns with no more than $25,000 in any gift, deduction, or 

exclusion category likely to involve an appraiser 196.3 196.0 196.5

Returns that could not be classified into either of the preceding 

groups 0.2 0.1 0.5

Gift tax returns filed in 2008 

Returns with over $25,000 in any gift, deduction, or exclusion 

category likely to involve an appraiser 43.7 37.3 50.0

Returns with no more than $25,000 in any gift, deduction, or 

exclusion category likely to involve an appraiser 213.3 212.9 213.5

Returns that could not be classified into either of the preceding 

groups 0.6 0.3 0.9

Gift tax returns filed in 2007 

Returns with over $25,000 in any gift, deduction, or exclusion 

category likely to involve an appraiser 41.2 38.6 43.8

Returns with no more than $25,000 in any gift, deduction, or 

exclusion category likely to involve an appraiser 201.7 201.2 202.1

Returns that could not be classified into either of the preceding 

groups 0.8 0.4 1.3

Source: GAO analysis of IRS data. 

a

IRS reports that 234,714 gift tax returns were filed in 2009; 257,485 in 2008; and 243,686 in 2007. 
Appendix III: Tables on Appraisal Usage and 

IRS Appraisal Enforcement 

Page 37 GAO-12-608 Appraised Values on Tax Returns 

Table 5: Absolute Value of Assets, Deductions, and Exclusions Reported on Gift Tax Returns, by Likeliness of Having a 

Valuation Done by an Appraiser 

Dollars in billions 

Estimate

Lower bound 

of 95 percent 

confidence interval 

Upper bound

of 95 percent

confidence interval

All items reported in 2009 $40.0 $39.4 $40.5

Items likely to involve an appraiser 14.0 13.4 14.7

Items unlikely to involve an appraiser 24.7 24.0 25.3

Items for which appraiser involvement is indeterminable 1.3 1.1 1.4

All items reported in 2008 $45.1 $44.3 $45.8

Items likely to involve an appraiser 15.0 14.3 15.7

Items unlikely to involve an appraiser 29.2 28.4 30.0

Items for which appraiser involvement is indeterminable 0.9 0.8 1.0

All items reported in 2007 $38.9 $38.5 $39.3

Items likely to involve an appraiser 14.0 13.5 14.5

Items unlikely to involve an appraiser 24.2 23.7 24.7

Items for which appraiser involvement is indeterminable 0.7 0.6 0.8

Source: GAO analysis of IRS data. 

Note: Dollar figures have been adjusted for inflation to 2012 dollars using the U.S. GDP deflator. 

Detail may not sum to total because of rounding. 
Appendix III: Tables on Appraisal Usage and 

IRS Appraisal Enforcement 

Page 38 GAO-12-608 Appraised Values on Tax Returns 

Table 6: Number of Taxpayers Reporting Amounts in Section B of Form 8283 in 2005 through 2008, by Likeliness of Needing a 

Qualified Appraisal 

In thousands 

Estimate

Lower bound 

of 95 percent 

confidence interval 

Upper bound

of 95 percent

confidence interval

All 2008 returns with more than $5,000 in deductions for 

noncash contributions carried from Section B of Form 8283 76.0 76.0 76.0

Returns identifiable as likely to involve a qualified appraisal 21.9 16.2 27.6

Returns identifiable as unlikely to involve a qualified appraisal 5.9 3.5 9.3

Returns whose likeliness could not be determined 48.2 37.4 58.9

All 2007 returns with more than $5,000 in deductions for 

noncash contributions carried from Section B of Form 8283 72.7 72.6 7.27

Returns identifiable as likely to involve a qualified appraisal 19.4 15.1 23.8

Returns identifiable as unlikely to involve a qualified appraisal 12.0 8.4 16.2

Returns whose likeliness could not be determined 41.3 31.9 50.6

All 2006 returns with more than $5,000 in deductions for 

noncash contributions carried from Section B of Form 8283 73.5 73.5 73.5

Returns identifiable as likely to involve a qualified appraisal 24.8 18.3 31.2

Returns identifiable as unlikely to involve a qualified appraisal 7.0 5.3 9.1

Returns whose likeliness could not be determined 41.8 32.5 51.1

All 2005 returns with more than $5,000 in deductions for 

noncash contributions carried from Section B of Form 8283 56.9 56.8 56.9

Returns identifiable as likely to involve a qualified appraisal 22.4 17.4 27.4

Returns identifiable as unlikely to involve a qualified appraisal 7.4 5.4 9.8

Returns whose likeliness could not be determined 27.0 19.9 34.2

Source: GAO analysis of IRS data. 

Note: Detail may not sum to total because of rounding. 
Appendix III: Tables on Appraisal Usage and 

IRS Appraisal Enforcement 

Page 39 GAO-12-608 Appraised Values on Tax Returns 

Table 7: Value of Deductions Reported in Section B of Form 8283 in 2005 through 2008, by Likeliness of Taxpayer Needing at 

Least One Qualified Appraisal 

Dollars in billions 

Estimate

Lower bound 

of 95 percent 

confidence interval 

Upper bound

of 95 percent

confidence interval

Amounts reported on all 2008 returns with more than 

$5,000 in deductions for noncash contributions carried 

from Section B of Form 8283 $8.8 $7.8 $9.9

Returns identifiable as likely to involve a qualified appraisal 6.3 5.3 7.4

Returns identifiable as unlikely to involve a qualified appraisal 1.0 0.9 1.1

Returns whose likeliness could not be determined 1.5 1.3 1.7

Amounts reported on all 2007 returns with more than 

$5,000 in deductions for noncash contributions carried 

from Section B of Form 8283 $14.6 $10.4 $18.7

Returns identifiable as likely to involve a qualified appraisal 10.6 6.8 14.3

Returns identifiable as unlikely to involve a qualified appraisal 1.7 1.5 1.8

Returns whose likeliness could not be determined 2.4 0.6 4.1

Amounts reported on all 2006 returns with more than 

$5,000 in deductions for noncash contributions carried 

from section B of form 8283 $12.6 $11.8 $13.4

Returns identifiable as likely to involve a qualified appraisal 8.4 7.6 9.1

Returns identifiable as unlikely to involve a qualified appraisal 2.9 2.8 3.1

Returns whose likeliness could not be determined 1.3 1.1 1.5

Amounts reported on all 2005 returns with more than 

$5,000 in deductions for noncash contributions carried 

from section B of form 8283 $11.6 $10.0 $13.1

Returns identifiable as likely to involve a qualified appraisal 9.0 7.5 10.6

Returns identifiable as unlikely to involve a qualified appraisal 1.2 1.0 1.3

Returns whose likeliness could not be determined 1.4 1.1 1.7

Source: GAO analysis of IRS data. 

Note: Dollar figures have been adjusted for inflation to 2012 dollars using the U.S. GDP deflator. 

Detail may not sum to total because of rounding. 
Appendix III: Tables on Appraisal Usage and 

IRS Appraisal Enforcement 

Page 40 GAO-12-608 Appraised Values on Tax Returns 

Table 8: Audit Rates for Estate Tax Returns Filed in 2007 through 2009, by Likeliness of Having a Valuation Done by an 

Appraiser 

Percentages 

Estimate

Lower bound 

of 95 percent 

confidence interval 

Upper bound

of 95 percent

confidence interval

All returns filed in 2009a 

Returns with over $50,000 in any asset, deduction, or exclusion 

category likely to involve an appraiser 10.9 9.9 12.0

Returns with no more than $50,000 in every category likely to 

involve an appraiser 19.0 10.9 29.7

All taxable or near taxable returns 11.2 10.2 12.3

All returns with estate values more than $100,000 below the 

taxable level 0.5 0.1 13.2

Taxable or near taxable returns with over $50,000 in any 

category likely to involve an appraiser 11.0 9.9 12.1

All returns filed in 2008 

Returns with over $50,000 in any asset, deduction, or exclusion 

category likely to involve an appraiser 10.6 9.9 11.3

Returns with no more than $50,000 in every category likely to 

involve an appraiser 11.9 7.5 17.6

All taxable or near taxable returns 10.8 10.0 11.5

All returns with estate values more than $100,000 below the 

taxable level 0.5 0.0 3.8

Taxable or near taxable returns with over $50,000 in any 

category likely to involve an appraiser 10.8 10.1 11.6

All returns filed in 2007 

Returns with over $50,000 in any asset, deduction, or exclusion 

category likely to involve an appraiser 7.6 7.0 8.2

Returns with no more than $50,000 in every category likely to 

involve an appraiser 5.9 2.7 11.0

All taxable or near taxable returns 8.2 7.5 8.9

All returns with estate values more than $100,000 below the 

taxable level 0.9 0.3 1.9

Taxable or near taxable returns with over $50,000 in any 

category likely to involve an appraiser 8.3 7.6 9.0

Source: GAO analysis of IRS data. 

a

IRS reports that the audit rate for all estate tax returns filed in 2009 was 10.1 percent. The audit rates 

for 2008 and 2007 were 9.3 and 8.1 percent, respectively. 
Appendix III: Tables on Appraisal Usage and 

IRS Appraisal Enforcement 

Page 41 GAO-12-608 Appraised Values on Tax Returns 

Table 9: Audit Rates for Gift Tax Returns Filed in 2007 through 2009, by Likeliness of Having a Valuation Done by an 

Appraiser 

Percentages 

Estimate

Lower bound 

of 95 percent 

confidence interval 

Upper Bound

of 95 percent

confidence interval

All returns filed in 2009a 

Returns with over $25,000 in any gift, deduction, or exclusion 

category likely to involve an appraiser 0.8 0.5 1.3

Returns with no more than $25,000 in any gift, deduction, or 

exclusion category likely to involve an appraiser 0.1 0.0 0.2

All returns filed in 2008 

Returns with over $25,000 in any gift, deduction, or exclusion 

category likely to involve an appraiser 1.3 0.9 1.8

Returns with no more than $25,000 in any gift, deduction, or 

exclusion category likely to involve an appraiser 0.1 0.0 0.2

All returns filed in 2007 

Returns with over $25,000 in any gift, deduction, or exclusion 

category likely to involve an appraiser 1.1 0.8 1.6

Returns with no more than $25,000 in any gift, deduction, or 

exclusion category likely to involve an appraiser 0.2 0.1 0.3

Source: GAO analysis of IRS data. 

a

IRS reports that the audit rate for all gift tax returns filed in 2009 was 0.7 percent. The audit rates for 

2008 and 2007 were 0.6 and 0.4 percent, respectively. 
Appendix III: Tables on Appraisal Usage and 

IRS Appraisal Enforcement 

Page 42 GAO-12-608 Appraised Values on Tax Returns 

Table 10: Audit Rates for Taxpayers Reporting Amounts in Section B of Form 8283 in 2005 through 2008, by Likeliness of 

Needing a Qualified Appraisal 

Percentage 

Estimate

Lower bound 

of 95 percent 

confidence interval 

Upper bound

of 95 percent

confidence interval

All 2008 returns with more than $5,000 in deductions for 

noncash contributions carried from Section B of Form 8283 1.4 0.3 3.7

Returns likely to involve a qualified appraisal 3.2 0.3 12.0

Returns unlikely to involve a qualified appraisal 1.5 0.3 3.9

Returns with adjusted gross income under $200,000 0.3 0.0 1.3

Returns with adjusted gross income above or equal to $200,000 3.5 0.7 9.9

All 2007 returns with more than $5,000 in deductions for 

noncash contributions carried from Section B of Form 8283 4.1 2.2 6.7

Returns likely to involve a qualified appraisal 4.2 2.0 7.6

Returns unlikely to involve a qualified appraisal 1.7 0.8 3.2

Returns with adjusted gross income under $200,000 0.5 0.0 2.9

Returns with adjusted gross income above or equal to $200,000 7.4 4.1 12.2

All 2006 returns with more than $5,000 in deductions for 

noncash contributions carried from Section B of Form 8283 2.8 1.4 4.9

Returns likely to involve a qualified appraisal 2.2 1.0 4.0

Returns unlikely to involve a qualified appraisal 7.0 1.0 21.8

Returns with adjusted gross income under $200,000 1.8 0.4 5.1

Returns with adjusted gross income above or equal to $200,000 4.4 2.2 7.8

All 2005 returns with more than $5,000 in deductions for 

noncash contributions carried from Section B of Form 8283 2.0 1.2 3.1

Returns likely to involve a qualified appraisal 2.4 1.2 4.3

Returns unlikely to involve a qualified appraisal 0.4 0.1 1.3

Returns with adjusted gross income under $200,000 0.5 0.0 2.9

Returns with adjusted gross income above or equal to $200,000 3.4 2.1 5.4

Source: GAO analysis of IRS data. 
Appendix III: Tables on Appraisal Usage and 

IRS Appraisal Enforcement 

Page 43 GAO-12-608 Appraised Values on Tax Returns 

Table 11: Rates of Audit That Included Noncash Contributions as an Issue for Taxpayers Reporting Amounts in Section B of 

Form 8283 in 2005 through 2008, by Likeliness of Needing a Qualified Appraisal 

Percentages 

Estimate

Lower bound 

of 95 percent 

confidence interval 

Upper bound

of 95 percent

confidence interval

All 2008 returns with more than $5,000 in deductions for 

noncash contributions carried from Section B of Form 8283 0.2 0.1 0.5

Returns likely to involve a qualified appraisal 0.4 0.1 1.3

Returns unlikely to involve a qualified appraisal 0.8 0.0 3.7

All 2007 returns with more than $5,000 in deductions for 

noncash contributions carried from Section B of Form 8283 1.2 0.6 2.1

Returns likely to involve a qualified appraisal 1.0 0.6 1.7

Returns unlikely to involve a qualified appraisal 1.1 0.3 2.6

All 2006 returns with more than $5,000 in deductions for 

noncash contributions carried from Section B of Form 8283 1.5 0.4 3.7

Returns likely to involve a qualified appraisal 0.6 0.2 1.3

Returns unlikely to involve a qualified appraisal 4.5 0.2 21.3

All 2005 returns with more than $5,000 in deductions for 

noncash contributions carried from Section B of Form 8283 0.7 0.3 1.3

Returns likely to involve a qualified appraisal 0.5 0.3 1.0

Returns unlikely to involve a qualified appraisal 0.1 0.0 0.9

Source: GAO analysis of IRS data. 
Appendix III: Tables on Appraisal Usage and 

IRS Appraisal Enforcement 

Page 44 GAO-12-608 Appraised Values on Tax Returns 

Table 12: No-Change Rates for Audit That Included Noncash Contributions as an Issue for Taxpayers Reporting Amounts in 

Section B of Form 8283 in 2005 through 2008, by Likeliness of Needing a Qualified Appraisal 

Percentages 

Estimate

Lower bound 

of 95 percent 

confidence interval 

Upper bound

of 95 percent

confidence interval

All 2008 returns with more than $5,000 in deductions for 

noncash contributions carried from Section B of Form 8283 72.2 20.6 98.6

Returns likely to involve a qualified appraisal 56.2 0.0 98.2

Returns unlikely to involve a qualified appraisal 100.0 60.7 100.0

All 2007 returns with more than $5,000 in deductions for 

noncash contributions carried from Section B of Form 8283 88.0 72.0 96.7

Returns likely to involve a qualified appraisal 62.1 32.1 86.5

Returns unlikely to involve a qualified appraisal 86.2 59.6 98.1

All 2006 returns with more than $5,000 in deductions for 

noncash contributions carried from Section B of Form 8283 37.3 3.3 86.4

Returns likely to involve a qualified appraisal 56.6 15.3 91.7

Returns unlikely to involve a qualified appraisal 99.4 58.7 99.8

All 2005 returns with more than $5,000 in deductions for 

noncash contributions carried from section B of form 8283 35.8 11..5 67.1

Returns likely to involve a qualified appraisal 63.3 46.7 77.9

Returns unlikely to involve a qualified appraisal 100.0 65.2 100.0

Source: GAO analysis of IRS data. 
Appendix IV: Comments from the Internal 

Revenue Service 

Page 45 GAO-12-608 Appraised Values on Tax Returns 

Appendix IV: Comments from the Internal 

Revenue Service 
Appendix IV: Comments from the Internal 

Revenue Service 

Page 46 GAO-12-608 Appraised Values on Tax Returns 
Appendix V: GAO Contact and Staff 

Acknowledgments 

Page 47 GAO-12-608 Appraised Values on Tax Returns 

James R. White, (202) 512-9110 or whitej@gao.gov

In addition to the contact named above, James Wozny, Assistant 

Director; Anthony Bova; Michael Brostek; Sara Daleski; Eric Gorman; 

Suzanne Heimbach; Karen O’Conor; Melanie Papasian; Albert Sim; 

Sabrina Streagle; Karen Villafana; and William Woods made key 

contributions to this report. 

Appendix V: GAO Contact and Staff 

Acknowledgments 

GAO Contact 

Staff 

Acknowledgments 

(450869)
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