All About Estates

Valuations for estate planning arrangements and tax disputes.

I was at a conference for professional valuators and appraisers from around North America. There was a session devoted to the do’s and don’ts when dealing with the tax authorities on disputes with valuations, presented by two gentlemen with considerable experience with tax disputes on both sides of the border.

I was interested in hearing that while estate and gift tax returns have a high audit focus in the USA by the Internal Revenue Service (“IRS”) , so be especially careful if you are settling an estate in the US, there does not appear to be a particular audit focus on returns filed with the Canada Revenue Agency (“CRA”) related to estate planning arrangements. Nevertheless, the risk of a CRA audit is ever present.

I have been writing about valuations for estate plan agreements, highlighting that they should be based on fair and reasonable methods, prepared in good faith, properly supported and documented at the time of valuation.

At the conference, both presenters concurred that in any dispute with the tax authority, related to valuations in particular, make sure you present all the facts and assumptions used to support the valuation, don’t be afraid to educate the auditor on your position if needed. The emphasis should be on exchange of information and discussion in a reasonable fashion. In this regard you will provided ample opportunity to discuss, negotiate and reconsider if necessary. Notably, both referred to maintaining a positive relationship as key to a satisfactory settlement. By the way, avoid complaining, no matter how frustrating you might find the process. It really doesn’t help.

Also keep in mind that in Canada as opposed to the USA, the CRA can only resolve its position on a “principles” basis, and “splitting it down the middle” is not one of them.

If all else fails and you find yourself going to Appeals as a result of an unfavorable assessment, or even to Court, you can take some comfort that you will be well prepared.

Thanks for reading

About Steven Frye
Baker Tilly WM LLP is a leading, independent audit, tax, and business advisory firm based in Vancouver and Toronto, serving clients across Canada. Drawing on well-trained teams across a variety of disciplines, we ensure the alignment of our professional’s skills and experience with client requirements, resulting in exceptional service and business outcomes.