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Title 26, Internal Revenue CodeRelease 119-110

§6695A Substantial and Gross Valuation Misstatements Attributable to Incorrect Appraisals

Title 26 › Subtitle F — Procedure and Administration › CHAPTER 68 — ADDITIONS TO THE TAX, ADDITIONAL AMOUNTS, AND ASSESSABLE PENALTIES › Subchapter B — Assessable Penalties › PART I — GENERAL PROVISIONS › § 6695A

Last updated Sep 22, 2026|Official source

Summary

If a person makes an appraisal and knew or should have known it would be used on a tax return or refund claim, and the value from that appraisal causes a big valuation error on the return (as described in sections 6662(e), 6662(g), or 6662(h)), that person must pay a penalty. The penalty is the smaller of: (1) the larger of either 10% of the underpayment (as defined in section 6664(a)) caused by the error or $1,000, or (2) 125% of the money the person was paid for the appraisal. No penalty applies if the person proves to the IRS that the appraisal value was more likely than not correct.

Full Legal Text

Title 26, §6695A

Internal Revenue Code, Source: USLM XML via OLRC

(a)Imposition of penalty
If—
(1)a person prepares an appraisal of the value of property and such person knows, or reasonably should have known, that the appraisal would be used in connection with a return or a claim for refund, and
(2)the claimed value of the property on a return or claim for refund which is based on such appraisal results in a substantial valuation misstatement under chapter 1 (within the meaning of section 6662(e)), a substantial estate or gift tax valuation understatement (within the meaning of section 6662(g)), or a gross valuation misstatement (within the meaning of section 6662(h)), with respect to such property,
then such person shall pay a penalty in the amount determined under subsection (b).
(b)Amount of penalty
The amount of the penalty imposed under subsection (a) on any person with respect to an appraisal shall be equal to the lesser of— (1)
(2)125 percent of the gross income received by the person described in subsection (a)(1) from the preparation of the appraisal.
(c)Exception
No penalty shall be imposed under subsection (a) if the person establishes to the satisfaction of the Secretary that the value established in the appraisal was more likely than not the proper value.

Legislative History

Notes & Related Subsidiaries

Editorial Notes

Codification section 1219(b)(1) of Pub. L. 109–280, which directed the addition of section 6695A at the end of part I of subchapter B of chapter 68, without specifying the act to be amended, was executed by adding section 6695A at the end of part I of subchapter B of chapter 68 of this title, which consists of the Internal Revenue Code of 1986, to reflect the probable intent of Congress.

Amendments

2007—Subsec. (a). Pub. L. 110–172, § 11(a)(40), designated the words “then such person shall pay a penalty in the amount determined under subsection (b).”, appearing in par. (2), as concluding provisions of subsec. (a). Subsec. (a)(2). Pub. L. 110–172, § 3(e)(1), inserted “a substantial estate or gift tax valuation understatement (within the meaning of section 6662(g)),” before “or a gross valuation misstatement”.

Statutory Notes and Related Subsidiaries

Effective Date

of 2007 AmendmentAmendment by section 3(e)(1) of Pub. L. 110–172 effective as if included in the provisions of the Pension Protection Act of 2006, Pub. L. 109–280, to which such amendment relates, see section 3(j) of Pub. L. 110–172, set out as a note under section 170 of this title.

Effective Date

Section applicable to appraisals prepared with respect to returns or submissions filed after Aug. 17, 2006, with special rule for certain easements, see section 1219(e)(2), (3) of Pub. L. 109–280, set out as an

Effective Date

of 2006

Amendments

note under section 170 of this title.

Reference

Citations & Metadata

Citation

26 U.S.C. § 6695A

Title 26, Internal Revenue Code

Last Updated

Sep 22, 2026

Release point: 119-110