For purposes of this document, intangible property includes, but is not limited to, any commercially transferable interest in any items included in the following seven categories:

An item is considered similar if it derives its value not from physical attributes, but from its intellectual content or other intangible properties.

The guidelines provided here regarding identifying, documenting, and analyzing the property are applicable to all types of intangible property. This IRM does not provide specific details for every type of intangible property.

Valuations of assets owned and/or transferred by or between controlled taxpayers (within the meaning of Treasury Regulation 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:

Appraisers will adequately plan the valuation assignment. Their managers will supervise the staff involved in the valuation process.

Quality planning is a continual process throughout the valuation assignment.

Refer to the Engineering webpage at https://irssource.web.irs.gov/LBI/SitePages/ENG.aspx for available valuation resources.

In developing a valuation conclusion, appraisers should define the assignment and determine the scope of work necessary by identifying the following:

The interest to be valued may include:

In developing a valuation conclusion, appraisers should obtain the relevant information necessary to accomplish the assignment.

Appraisers should begin with a general definition and analysis of what constitutes the intangible property. To have economic value, intangible property should:

The description of the property should clearly identify the particular intangible property being valued. The description should be unambiguous and provide a complete identification of relevant transactions, and geographic scope of the property, where applicable. It may also specify physical, functional, technical, or economic parameters to identify the particular intangible property.

There may be a need to define what is meant by "intangible asset" from the point of view of the Internal Revenue Code and the Treasury Regulations, specifically, IRC 367(d) and Treasury Regulation 1.482-4(b).

The appraiser should be aware that certain kinds of intangible property are also referred to as intellectual property. Intellectual property is often registered under federal and state statutes for protection. This registration may create legal and economic attributes that relate to value.

Information relevant to the specific property being valued includes:

If the intangibles subject to valuation have been transferred between or developed by controlled taxpayers within the meaning of IRC 482 and the regulations under that section, additional issues may need to be considered, including which entity owns the intangible. In such cases, prior to conducting the valuation, the appraiser should coordinate with the customer to ensure that all relevant issues have been identified.

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

All factors that affect the value should be considered including:

Analyze any relevant transactions including:

Analysis of a transaction may reveal other property or services related to the primary transaction such that a bundle of property rights or services are or should be involved.

Different types of risk assumed by the owner or acquiror could impose requirements on allocation of risk. Risks that may need to be accounted for include:

The specific valuation approach, such as market, cost, or income should be appropriate. Judgment should be used to select the approach(es) ultimately used and the method(s) within such approaches that best indicate the value of the property. The relationship between these approaches and fair market value must be demonstrated.

Some fundamental methods utilized to value intangible property include:

Only those approaches and methods deemed appropriate for dealing with the valuation issue in question should be analyzed in detail, and reasons should be given for using them. Also, it should be documented why other methods were rejected.

The appraiser should identify potential comparable properties. As available and appropriate, this should include an explicit, itemized list of selection criteria employed for selecting the comparable intangible assets. In addition to general standards of comparability, namely functions, contractual terms, risks, economic conditions, and property or service, certain refinements may be applied specifically to intangible assets. The comparable intangible should:

The market approach should consider the identification and justification of:

The cost approach begins with an estimate of the cost to reproduce the intangible. One method is using historical cost. Adjustments should be made for obsolescence.

The income approach considers:

The final opinion of value should reflect the appropriateness of each method, and the veracity and reliability of the data supporting each method, leading the reader logically to the final opinion of intangible value. It should ensure applied methods' results yield similar levels of value, reconcile the results, and set forth all assumptions and limiting conditions affecting the analyses, opinions, and conclusions.

Workpapers should document the steps taken, techniques used, and provide evidence to support the facts and conclusions in the final report.

Appraisers will maintain a detailed case activity record (Form 9984, Examining Officer's Activity Record) which is prepared consistent with IRM 4.48.1.4.

The case activity record, along with the supporting workpapers, should justify time spent as commensurate with work performed.

In reviewing an intangible 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 nature of the review process undertaken.

In reviewing an intangible 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 supportable valuation.

The objective, if possible, is to resolve the valuation issue as early in the examination as possible.

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 professional judgment in considering this information to arrive at a specific conclusion of value.

Appraisers may not have all 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 proper 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 an appraisal report is to provide convincing and compelling support for the conclusions reached.

Appraisal reports should contain all the information necessary to allow a clear understanding of the valuation analyses and demonstrate how the conclusions were reached.

The extent and content of the report prepared depends on the needs of each customer.

Appraisal reports should clearly communicate the results and identify the information relied upon in the valuation process. The report should effectively communicate the methodology and reasoning, as well as identify the supporting documentation.

Subject to the type of report being written, appraisal reports generally should contain sufficient identification, documentation and analysis to ensure consistency and quality. See IRM 4.48.5.2.2, Identifying, IRM 4.48.5.2.3, Defining and Documenting, and IRM 4.48.5.2.4, Analyzing.

Review reports as described in IRM 4.48.5.2.6, Reviewing, shall contain sufficient identification, documentation and analysis as required by IRM 4.48.5.2.2, IRM 4.48.5.2.3 and IRM 4.48.5.2.4, to support the appraiser’s assumptions, analyses and/or conclusions.

Each written valuation report should contain a signed statement that is similar in content to the following:

To the best of my knowledge and belief:

Certification may be amended if appraisers are required to comply with professional designation and or state license requirement.