The United States Tax Court recently found that an appraisal does not necessarily need to comply with the Uniform Standards of Professional Appraisal Practice – commonly known as USPAP – to be admissible or reliable. In Whitehouse Hotel Limited Partnership v. Commissioner of Internal Revenue – filed October 30, 2008 – the IRS’ appraiser submitted an appraisal that did not fully comply with USPAP. The taxpayer argued that the appraiser’s report was per se unreliable since it is not in conformance with USPAP. It further argued that it should not be received into evidence.
The Tax Court rejected that argument and admitted the appraisal into evidence. It offered the following explanation for its holding:
“USPAP is widely-recognized and accepted as containing standards applicable to the appraisal profession. Adherence to those standards is evidence that the appraiser is applying methods that are generally accepted within the appraisal profession. Therefore, at a minimum, compliance with USPAP is an indication that the appraiser’s valuation report is reliable. However, a noncompliant valuation report is not per se unreliable. Full compliance with professional standards is not the sole measure of an expert’s reliability. Petitioner essentially asks the Court to supplant its responsibility to assess an expert’s reliability with a rigid standard of reliability. Sole reliance on USPAP is a far more inflexible definition of reliability than the definition (depending on “reliable principles and methods”) incorporated into Rule 702 of the Federal Rules of Evidence. Therefore, we decline to adopt USPAP as the sole standard for reliability of an expert appraiser.”