Business Valuation for IRS Form 706

Business Valuation Appraisals for IRS Form 706

When a decedent's estate includes an ownership interest in a closely held business, partnership, or LLC, a qualified business valuation is required to report fair market value on IRS Form 706. This requirement applies when the gross estate exceeds the applicable filing threshold, currently $13,990,000 for decedents dying in 2025. Treasury Regulation Section 20.2031-6(b) mandates that the appraisal be executed under oath and filed with the return. AppraiseItNow's business valuation practice covers the full range of privately held entities, from sole proprietorships and family-owned companies to minority partnership interests and multi-entity structures.

We deliver appraisals both online and onsite across the United States, working directly with estate attorneys, CPAs, and executors to meet filing deadlines. Our Form 706 estate tax valuation services are structured to produce IRS-defensible reports that withstand audit scrutiny and satisfy the qualified appraiser standards under the Internal Revenue Code. Our mission is to deliver defensible, USPAP-compliant valuations with exceptional speed, professionalism, and client service.

Business Interests We Appraise for Form 706 Estate Tax Returns

AppraiseItNow appraises a wide range of business ownership interests and entity types for estate tax reporting purposes.

• Closely held C corporations, including family-owned operating companies
• S corporations with single or multiple shareholders
• General and limited partnership interests, including family limited partnerships (FLPs)
• Multi-member and single-member LLCs with operating or holding company structures
• Minority and non-controlling ownership interests subject to marketability and control discounts
• Professional practices including medical, dental, legal, and accounting firms
• Holding companies with mixed asset portfolios including real property, securities, or equipment
• Franchise businesses and licensed operating entities
• Agricultural operations, including farm partnerships and ranching entities
• Startup and early-stage companies with limited operating history

How AppraiseItNow Approaches Business Valuations for Form 706

Our appraisers analyze each engagement using the income, market, and asset-based approaches, selecting the methodology or combination of methodologies most appropriate for the specific entity type, industry, and ownership interest being valued.

• Reports include a thorough review of three to five years of financial statements, tax returns, operating agreements, shareholder agreements, and any relevant litigation documentation, with findings documented to IRS reporting standards under IRM 4.48.4.
• Appraisers apply appropriate discounts for lack of control and lack of marketability where applicable, and address goodwill, intangible assets, and passive asset exclusions in accordance with IRS guidelines.
• All appraisals are prepared by credentialed professionals holding designations from recognized bodies including ASA, ISA, AAA, CAGA, AMEA, and NEBB, and every report is USPAP-compliant and signed under oath as required by Treasury regulations.
• Clients receive a fully documented written report that details the scope of work, valuation date, methodologies applied, supporting data, and the appraiser's reasoned conclusions, formatted to accompany Form 706 and withstand IRS review.

What does a Business Valuation appraisal for IRS Form 706 involve?

A business valuation appraisal for IRS Form 706 is a professional determination of the fair market value of non-publicly traded business interests included in a decedent's gross estate, prepared for accurate reporting on the estate tax return. The report follows IRS guidelines under IRM 4.48.4 and Treasury Regulation Section 20.2031-6(b), detailing the property, valuation methods used, and appraiser qualifications. The completed appraisal must be executed under oath and filed with Form 706.

When is a business valuation appraisal required for Form 706?

A business valuation appraisal is required when the gross estate exceeds the federal estate tax exemption threshold and includes non-publicly traded business interests that must be reported on Schedule F of Form 706. Executors must establish fair market value as of the date of death, or the alternate valuation date if elected. Without a qualified appraisal, estates face significant risk of IRS disputes over valuation, which can lead to audits or adjusted tax liabilities.

What credentials should the appraiser have?

The appraiser should have demonstrated expertise in IRS estate valuation regulations, including IRM 4.48.4, and experience selecting appropriate methodologies for the specific type of business being valued. AppraiseItNow appraisers hold credentials through recognized professional organizations including ASA, ISA, AAA, CAGA, AMEA, and NEBB, and are fully qualified to produce sworn reports that can withstand IRS scrutiny.

How is a business valued for IRS Form 706?

The IRS recognizes three primary approaches for valuing business interests on Form 706: the income approach, which discounts projected cash flows; the market approach, which compares the business to recent sales of similar companies; and the asset-based approach, which calculates net assets minus liabilities. Appraisers select and weigh these methods based on the nature of the business, industry conditions, and available data, while also considering factors such as earning capacity, goodwill, marketability, and control per IRC Section 20.2031-2. The final report reconciles all methods applied and excludes passive assets not attributable to the business.

Are AppraiseItNow's appraisals USPAP-compliant?

Yes, all AppraiseItNow business valuation appraisals are fully USPAP-compliant and prepared to meet IRS qualified appraisal standards, including proper valuation date documentation, methodology disclosure, appraiser credential statements, and a non-contingent fee declaration. This ensures the report is suitable for filing with IRS Form 706 and defensible in the event of an audit.

How long does a Business Valuation appraisal take?

Most business valuation engagements for IRS Form 706 are completed within 2 to 4 weeks from the time all required materials are received. If your filing deadline requires a faster turnaround, rush service is available with delivery in 7 to 10 days upon request.

What does a business valuation appraisal for Form 706 cost?

Fees are fixed and quoted before work begins, so you will know your exact cost prior to engaging our team. Advanced business valuations prepared for IRS estate tax purposes start at $5,000, with most engagements falling in the range of $7,500 to $12,000. Highly complex or multi-entity assignments can reach $15,000 to $20,000 or more depending on scope. Key factors that influence cost include:

• The complexity and size of the business or assets being valued
• The quality and completeness of financial records provided
• The number of entities or subjects included in the engagement
• The valuation approaches required and depth of market research needed

Visit our business appraisal page for more detail on how fees are structured.

Can you appraise businesses anywhere in the US?

Yes, AppraiseItNow provides business valuation appraisals for IRS Form 706 purposes nationwide. Our appraisers work with estates across all US states, and engagements are conducted remotely using financial records and documentation provided by the executor or estate representative.

Will my appraisal be accepted by the IRS, insurers, or courts?

AppraiseItNow appraisals are prepared to meet qualified appraisal standards, including proper valuation date documentation, disclosed methodology, appraiser credentials, and a non-contingent fee declaration, all of which align with IRS requirements under IRM 4.48.4 and Treasury Regulation Section 20.2031-6(b). While no appraisal firm can guarantee acceptance in every circumstance, following these standards significantly reduces the risk of IRS challenge and positions the report to hold up in audits or legal proceedings.

Which estates need a business valuation appraisal for Form 706?

Any estate that exceeds the federal estate tax exemption threshold and includes non-publicly traded business interests is required to obtain a qualified business valuation for Schedule F of Form 706. Publicly traded securities can be valued using market quotes, but closely held businesses, partnerships, and similar interests require an independent expert appraisal to establish a defensible fair market value as of the date of death.

What documents are needed to complete a Form 706 business valuation?

Appraisers typically require three to five years of financial statements including balance sheets, income statements, and cash flow statements, along with corporate and personal tax returns, operating or shareholder agreements, and any relevant financial projections. Bank statements and records of pending litigation or contingent liabilities are also important for a thorough analysis.

When should the appraisal be obtained relative to the Form 706 filing deadline?

The appraisal should be initiated as soon as possible after the date of death, since IRS guidance discourages delaying a date-of-death valuation. Form 706 is generally due nine months after the date of death, though extensions may be available, and the appraisal must be filed with the return.

How is goodwill treated in a business valuation for Form 706?

Goodwill is treated as an intangible asset included in the fair market value of the business under IRC Section 20.2031-2, which means it directly affects the total estate value reported and the resulting tax liability. Because goodwill valuation involves a degree of subjectivity, the appraisal report must include thorough documentation and justification of the methods and assumptions used to quantify it.

What are the most common mistakes in Form 706 business appraisals?

Common errors include selecting a valuation methodology that does not fit the nature of the business, failing to properly account for goodwill or exclude passive assets, and delaying the date-of-death appraisal until supporting data becomes harder to reconstruct. Inadequate documentation of factors such as marketability discounts, earnings fluctuations, or control premiums can also lead to IRS rejection of the appraisal.