Appraisal for IRA Conversion in Kansas

An IRA conversion, usually a Roth IRA conversion, is when you move money from a traditional IRA into a Roth IRA so you pay taxes now instead of later. In a traditional IRA, you often get a tax break when you put money in, but you must pay income tax when you take it out in retirement. In a Roth IRA, you put in money that has already been taxed, and then, if you follow the rules, it can grow and be withdrawn tax free in retirement.

When you do a conversion, the amount you move is added to your income for that year, and you owe income tax on it, but usually no 10% early withdrawal penalty just for converting. People often choose conversions if they expect to be in a higher tax bracket later, want tax-free income in retirement, or like that Roth IRAs do not require minimum withdrawals during their lifetime. This can also help leave tax-free money to heirs.

An IRA conversion appraisal is a professional valuation that tells the IRS what your IRA asset is truly worth at the moment you convert it from a traditional IRA to a Roth IRA. Instead of guessing the value, a qualified appraiser figures out the asset’s fair market value, meaning the price a typical buyer would pay a typical seller in today’s market. This is especially important for things like real estate, private business interests, or other non‑public investments inside a self‑directed IRA, because they don’t have a simple stock‑market price. The IRS uses this appraised value to decide how much income you must report, and therefore how much tax you owe, on the conversion.

When is an appraisal required for an IRA conversion?

An appraisal is required when the IRA conversion involves assets that do not trade on a public market. This commonly includes:

• Closely held business interests
• LLC or partnership interests
• Private equity or private debt investments
• Real estate held inside a self-directed IRA
• Promissory notes or other illiquid assets

Publicly traded securities generally do not require an appraisal because their value is observable.

Why does the IRS require an appraisal for IRA conversions?

The tax owed on an IRA conversion is based on the fair market value of the assets on the conversion date. When there is no clear market price, the IRS requires an independent valuation to support the reported amount.

A qualified appraisal helps ensure the value used for tax reporting is reasonable, well-documented, and defensible if questioned.

What type of value is used for an IRA conversion appraisal?

IRA conversion appraisals are performed using Fair Market Value, defined as the price at which the asset would change hands between a willing buyer and a willing seller, with neither under compulsion and both having reasonable knowledge of the relevant facts.

The valuation date is typically the exact date the conversion occurs.

Is it better for the valuation to be low or high?

From a tax perspective, a lower supportable valuation generally results in less taxable income at the time of conversion, while a higher valuation increases the immediate tax cost.

That said, the value must reflect fair market value, not a target number. Undervaluing assets can increase the risk of IRS scrutiny, penalties, and interest, while overvaluing assets can lead to unnecessary tax payments. The goal is a reasonable, well-supported valuation, not an aggressive outcome.

Do discounts for lack of control or lack of marketability apply?

In many cases, yes—discounts for lack of control (DLOC) and lack of marketability (DLOM) may apply, depending on the specific asset being converted.

For example, minority interests in closely held businesses or LLCs often lack control and cannot be readily sold, which may justify appropriate valuation discounts. Whether these discounts apply—and to what extent—depends on ownership rights, transfer restrictions, operating agreements, and market evidence.

Any discounts used must be well-supported and clearly documented in the appraisal report.

Who can perform an IRA conversion appraisal?

IRA conversion appraisals must be prepared by an independent, qualified valuation professional with experience in the specific asset type being converted.

Valuations prepared by the investor, the asset sponsor, the investment manager, or related parties are generally not accepted by the IRS, the Department of Labor, or most auditors.

Are IRA conversion appraisals USPAP compliant?

When required by the intended use, IRA conversion appraisals are prepared in accordance with the Uniform Standards of Professional Appraisal Practice (USPAP). The report clearly discloses the scope of work, assumptions, and valuation methodologies used.

Your CPA or tax advisor can confirm whether USPAP compliance is required for your specific situation.

How long does an IRA conversion appraisal take?

Most IRA conversion appraisals are completed within several business days after all required information is received. More complex assets or ownership structures may require additional time.

If timing is critical for year-end or tax-planning purposes, expedited options may be available.

What information is needed to complete an IRA conversion appraisal?

Required information varies by asset but often includes:

• Ownership documents or operating agreements
• Financial statements or income records
• Details on transfer restrictions or voting rights
• Prior valuations, if available

Our team outlines all requirements upfront before work begins.

Will my CPA or custodian accept the appraisal?

Appraisals prepared by independent, qualified appraisers are commonly accepted by CPAs, tax advisors, IRA custodians, and auditors. Acceptance ultimately depends on the reviewer’s requirements, which we help clarify early in the process.

How do I get started?

You can request an IRA conversion appraisal by submitting basic details about the assets being converted. We’ll confirm scope, timing, and pricing before the appraisal begins and coordinate with your advisor as needed.

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