Bonaffini, the IRS Program Manager for the Estate and Gift Tax, also noted that the higher the estate value, the greater the chance of an audit.  Professionals who prepare these returns expressed surprise at the low number of audits, saying they would have expected that one of every two returns might be audited. 

The Webcast, entitled "Estate and Gift Tax Update," featured panelists from the IRS, as well as practitioners that specialize in estate planning.  The panelists covered topics in the estate and gift tax field, including the new laws, new forms and new places to file. 

One of the most difficult issues facing tax professionals -- and one most likely to lead to audits -- is evaluation of estate assets, especially art work, real estate, and closely-held businesses. Panelist John J. Palmeri provided advice on identifying and appraising these assets.

"The practitioner needs to do some detective work to find out the estate's assets. Looking at 1040s might be a good start, as well as homeowners insurance, to determine if there is any valuable personal property," Palmeri suggested.    

Aen Walker Webster, shareholder with the law firm Silverstein and Mullens, a division of Buchannan Rand, added, "You should watch the mail for statements and supporting information. You might receive a letter from a bank discussing a safe deposit box, or a letter from a life insurance company that might give you a clue as to your loved one’s assets."

Panelists favored obtaining appraisals of the value of assets prior to filing a return and discussed which methods would be most acceptable to the IRS in the event of an audit. 

"To get a full-blown appraiser with all the titles behind his name always serves the client and the community well," stated Dan Williamson, LL.M, CPA. "The main reluctance is that clients don’t want to pay for it." Viewers learned that on the form 706, the cost of the appraisal itself is deductible. 

Noting the benefit of a market-value appraisal during an audit, Palmeri added, "Paying upfront gets the job done right from the beginning and it will often pay back in dividends at the end."

Separately, viewers learned of new tax benefits for survivors of the September 11 attacks and other new IRS rules. These changes and other estate tax topics can be found on the Tax Talk Today Website at www.taxtalktoday.tv under the Resources link.     

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