Is an appraisal required for a gift tax return?

An appraisal is not always legally required to file a gift tax return, but the IRS effectively requires either a qualified appraisal or a detailed, defensible valuation methodology for any non-cash gift, and for most meaningful assets a professional appraisal is the only practical way to meet that standard.

Form 709 instructions state that non-cash gifts must be reported with either a qualified appraisal or a detailed description of the method used to determine fair market value, including the financial data relied upon and any discounts applied (such as for lack of marketability or minority interest). Gifts of cash or publicly traded stock rarely need an appraisal since their value is easily verified. But gifts of real estate, closely held business interests, artwork, or other illiquid assets fall into a gray area where "detailed methodology" in practice means a formal, USPAP-compliant valuation report.

The stakes go beyond simply filling out the form correctly. Under the adequate disclosure rules, the IRS's three-year statute of limitations to challenge your reported value only begins running if the gift is adequately disclosed, and a qualified appraisal is the clearest way to meet that bar. Without one, the IRS can revisit the valuation indefinitely, which creates lasting uncertainty for you and your beneficiaries.

For gifts of a business interest or fractional ownership stake, a professional business valuation prepared in accordance with USPAP and IRS requirements documents the methodology, market data, and any discounts applied, giving your Form 709 filing a defensible foundation. If you're weighing how a specific gift will be valued, see our answer on how gifts are valued for tax purposes.