Certified Valuation Analyst (CVA) Practice Exam

Which standard provides authoritative guidance for gift, estate, and inheritance taxes?

1. IRS Guidelines

2. RR 59-60

3. FASB 123R

4. SEC Rule 144

The correct answer is: RR 59-60

The proper standard that provides authoritative guidance for gift, estate, and inheritance taxes is Revenue Ruling 59-60. This ruling is crucial in the valuation context because it outlines the methods and considerations for appraising assets for tax purposes, particularly in the scope of gift and estate taxation. Revenue Ruling 59-60 establishes crucial principles that appraisers must follow, such as the importance of fair market value and the factors that must be considered in determining this value. This includes consideration of the relevant market data, operational aspects of the entity in question, the rights associated with ownership, and economic factors that can influence the asset’s value. Revenue Ruling 59-60 is instrumental for appraisers and legal professionals dealing with taxation matters to ensure compliance with IRS regulations and adherence to proper valuation methodologies. In contrast, other options do not provide the specific authoritative guidance needed for gift, estate, and inheritance tax scenarios. IRS Guidelines are broader tax regulations but do not specifically target valuation processes. FASB 123R focuses on accounting and reporting standards for stock-based compensation, while SEC Rule 144 governs restricted securities and their resale, neither of which relate directly to gift or estate tax valuation.