Valuation for U.S. Tax Purposes: Supporting Trust Funding and Estate Planning with Assets Located in Asia Pacific

Valuation for U.S. Tax Purposes

There is a consistent demand for valuation services tied to U.S. tax filings when setting up and funding trusts. While clients should always consult their legal and tax advisors, Valtech has extensive experience providing valuations for U.S. tax purposes involving assets and interests located in the Asia-Pacific region.

The Valtech team comprises qualified appraisers holding the Accredited in Business Valuation (ABV) credential from the AICPA, along with professionals holding MRICS and CFA designations—globally recognized credentials in financial valuation. Based in Hong Kong and Singapore, Valtech possesses the experience and resources necessary to conduct appraisals for companies with primary operations in the Asia-Pacific region, particularly in Mainland China, Hong Kong, and Singapore, with coverage extending across Southeast Asia.

Common Scenarios That Trigger a Valuation Requirement

Valuation reports—or at minimum, defensible valuation support—are typically needed in the following situations:

• Funding irrevocable trusts with privately held interests to report the gift’s fair market value (FMV).
• Sales to grantor trusts (IDGTs): Support is required for both the FMV of what’s sold (e.g., minority equity interests) and the reasonableness of the note terms, which are often benchmarked to Applicable Federal Rates (AFRs), for gift-tax and audit defensibility.

Key Considerations in Valuations for U.S. Tax Purposes

• Standard of Value: Use Fair Market Value (FMV)—the price agreed upon between a willing buyer and a willing seller in an arm’s-length transaction, not an investment value specific to a particular party.
• Valuation Date: Gifts are valued as of the date of the gift; estates are valued as of the date of death.
• Adequate Disclosure: Provide a clear description of the property, consideration, and parties/relationships involved. Disclose the valuation method, key financial data, restrictions considered, and any discounts applied (with supporting rationale).
• Methodology and Support: Apply standard valuation approaches—income, market, and asset-based methods. For closely held interests, consider company history, outlook, financials, dividends, and comparable data. Use empirical evidence to support any discounts for lack of control (DLOC) or lack of marketability (DLOM).
• Documentation Quality: A high-quality report should be transparent and replicable. It should clearly state the purpose, standard and premise of value, assumptions, procedures, data sources, reconciliation, and final conclusion.