As part of their estate planning, many people want to give away property during their lifetime in order to reduce the size of their taxable estate.

In general, you can give $13,000 a year to anyone you like without having to pay gift tax, and you can make additional gifts over this limit, over the course of your lifetime, up to the amount of your gift tax exemption (although these larger gifts will reduce your estate’s exemption when you eventually pass away). Plus, you can give an unlimited amount to a spouse or charity.

One problem with making gifts for tax purposes is that some types of assets are hard to value. In particular, certain types of real estate, interests in a partnership, and stock in a family-owned business can be very difficult things on which to place a price tag.

You can obtain an independent appraisal of the assets’ value, but some people worry that even if they do, the IRS might disagree with the appraisal. They are concerned that the IRS will say the assets are worth more than they thought, and claim that the gifts were “over the limit” such that they have to pay gift tax.

Recently, a woman named Anne Petter came up with a solution to this problem and beat the IRS.

Anne owned membership units in a family LLC. She gave some of the units to two family trusts. An appraiser valued these units at an amount equal to Anne’s lifetime gift tax exemption. Anne also donated some units to charity. As part of the transfer to the trusts, she required that if the IRS appraised the units at a higher value, the trusts would have to give the difference to the charity.

The IRS did indeed appraise the units at a higher value, and it demanded that Anne pay $2.1 million in gift taxes.

But a federal appeals court in San Francisco sided with Anne. It said that no matter what value the IRS placed on the gift, as long as the trusts had to give any additional amount to the charity, Anne wasn’t “over the limit” and didn’t have to pay the gift tax.