Tangible personal property includes items such as vehicles, antiques, silver, artwork, collectibles, furniture, machinery, and equipment. Tangible personal property is anything other than real property or intangible personal property which includes items such as patents, copyrights, stocks, and the goodwill value of a business. See IRM 4.48.3.1.5 for additional guidance. The guidelines provided here regarding identifying, documenting and analyzing the property are applicable to all types of personal property. The information cannot provide specific details for every type of personal property, but a similar detailed breakdown can be outlined for any kind of property.

IRM 4.48.2, Valuation Assistance for Cases Involving Works of Art, which requires all taxpayer cases selected for audit with taxpayer claimed values of $20,000 or more per item of art to be sent to Art Appraisal Services for review by the Commissioner’s Art Advisory Panel is still applicable.

Valuation of assets owned and/or transferred by or between controlled taxpayers (within the meaning of 26 CFR 1.482–1(i)(5)) may present substantive issues that are not addressed in these guidelines. See IRM 4.61.3, Development of IRC 482 Cases, which provides general guidelines in the development of IRC 482 cases

See IRM 4.48.1.1.2, Overview of Engineering Program, Authority.

This document incorporates by reference the ethical and conduct provisions, contained in the Office of Government Ethics (OGE) Standards of Ethical Conduct, applicable to all IRS employees.

See IRM 4.48.1.1.3, Overview of Engineering Program, Roles and Responsibilities.

See IRM 4.48.1.1.4, Overview of Engineering Program, Program Objectives and Review.

The Engineering website is https://irssource.web.irs.gov/LBI/SitePages/ENG.aspx.

Other IRMs in this chapter include:

An initial risk analysis to determine the purpose, issue and scope of engagement services should be conducted as the initial planning of the engagement.

If an "engagement letter" is needed, the initial letter should be a risk analysis of the engagement. SB/SE requires a risk analysis and engagement letter within 30 days of engagement. See IRM 4.25.12.4, Estate and Gift Tax, Valuation Assistance, Referrals to Engineering Services. An additional risk analysis should be conducted mid-way through the engagement. See IRM 4.10.3.2.2, Mid-Audit Decision Point (50% Rule).

Appraisers will adequately plan the valuation services to be provided in the engagement. Their managers will supervise the staff involved in the valuation process.

Quality planning is a continual process throughout the valuation engagement.

Reference the Engineering website at https://irssource.web.irs.gov/LBI/SitePages/ENG.aspx.

To determine a valuation conclusion, appraisers must determine the scope of work which should identify the following:

The interest to be valued includes:

In developing a valuation conclusion, appraisers should obtain the relevant information necessary to complete the engagement.

Personal property item information should include, where applicable:

The photograph should be an 8x10 inch color photograph or a color transparency not smaller than 4x5 inches.

Property information for vehicles, machinery and equipment should include:

Regardless of the type of property, additional information should be obtained:

In developing a valuation conclusion, appraisers should analyze the relevant information necessary to accomplish the engagement.

All factors that affect the value should be considered.

The specific valuation approach, such as the market approach, the income approach, the replacement/reproduction cost approach should be considered for relative propriety of its application. Professional judgment should be used to select the approach(es) ultimately used and the method(s) within such approach(es) that best indicate the value of the property. When valuing personal property the income approach is often not applicable. The relationship between these approaches and fair market value must be demonstrated in the analysis and report.

Analysis of relevant public and/or private sales around the valuation date must provide the specific basis for the valuation (ideally including complete descriptions and illustrations).

The market (or trends) conditions near the valuation date should be considered.

The market demand for the subject property and the importance of the property and its relationship to its relevant artist/type/group etc. should be considered. In case of art and graphics, artist’s trends of sales of the artwork over time should be analyzed.

The effects of condition, style, quality, medium, artist or culture, provenance, restorations and rarity should be considered.

The effects of relevant contractual or legal restrictions should be considered.

The appraiser should clearly explain and provide reasoning for the value conclusion.

Any additional information or special circumstances that may affect the fair market value of the property should be considered.

Workpapers should document the steps taken and techniques used, and provide the evidence to support the facts and conclusions in the final report. See IRM 4.10.9.7, Workpapers and IRM 4.46.6, Workpapers and Reports Resources.

Appraisers will maintain a detailed case activity record (Form 9984, Examining Officer's Activity Record) which:

The case activity record, along with the supporting workpapers, must document activities and should include sufficient detail to justify the time spent is commensurate with work performed. See IRM 4.48.1.4, Workpapers.

In reviewing a personal property valuation and reporting the results of that review, an appraiser should form an opinion as to the adequacy and appropriateness of the report being reviewed and clearly disclose the scope of work of the review process undertaken.

In reviewing a personal property valuation, an appraiser should:

In the event of a disagreement with the report’s factual representations, underlying assumptions, methodology, or conclusions, the appraiser should conduct additional fact-finding, research, and/or analyses necessary to arrive at a credible value conclusion.

The objective, if possible, is to resolve the issue as early in the examination as possible to facilitate resolution of issues without litigation.

The appraiser will work in concert with the internal customer and taxpayer to attempt to resolve all outstanding issues.

Once the appraiser has all the information to be considered in resolving the issue, the appraiser will use his/her professional judgment in considering this information to arrive at a value conclusion.

Appraisers may not have all of the information they would like to have to definitively resolve an issue. Appraisers, therefore, should decide when substantially enough information is available to make a reasonable determination.

Appraisers will employ independent and objective judgment in reaching conclusions and will decide all matters on their merits, free from bias, advocacy, and conflicts of interest.

The primary objective of a valuation report is to provide convincing and compelling support for the value conclusions.

Depending upon the scope of work, valuation reports must contain sufficient information necessary to allow a clear understanding of the valuation analyses and demonstrate how the conclusions were reached in the report.

The content of the report prepared depends on the scope of work agreed to between appraiser and client.

Depending upon the scope of work, valuation reports must clearly communicate the results and identify the information relied upon in the valuation process. The report must effectively communicate the methodology and reasoning, as well as identify the supporting documentation.

Subject to the type of report written, valuation reports should generally contain sufficient information to ensure consistency and quality related to the items described in IRM 4.48.3.2.2, Identifying, IRM 4.48.3.2.3, Defining and Documenting, and IRM 4.48.3.2.4, Analyzing.

Reports written in compliance with IRM 4.48.3.2.6, Reviewing, must contain, at a minimum, information necessary to support the revised assumptions, analyses, and/or conclusions of the appraiser and relating to those items in the previously referenced IRM subsections, Identifying and Analyzing.

Each written valuation report should contain a signed statement that the report complies with applicable IRS Valuation Guidelines.