Real Estate Appraisal Estate Tax Date of Death Appraisers | Home Appraiser| Commercial real estate Appraisers Industrial Appraisers Southern Califoria

Date of Death Appraisal

Real Estate Appraisers | Retrospective Real Estate Appraisal Services | Estate Tax Appraiser
Los Angeles, Orange County, San Diego, Riverside County, San Bernardino County, Ventura County

Principal - Warren K. Hoppke, SRPA
Senior Real Property Analyst
Member Appraisal Institute

Robert Nord, MAI

Real Estate Comsultant
Member Appraisal Institute

There are many situations where you might need an experienced California real estate appraiser to give an oral or written appraisal opinion of current or retrospective "Fair Market Value" (FMV).

Estate Tax Filings and Date of Death Appraisals

As an executor you have been entrusted to carry out the wishes of the deceased as swiftly and exactly as possible. Federal and/or state estate tax returns are required whenever the total value of the decedent’s assets exceed the applicable filing thresholds. Effective for 2002 and 2003, if the total value of a decedent’s assets exceed $1,000,000, a Federal estate tax return will be required; for 2004, the total value of the decedent's estate must exceed $1,500,000. For donated property when the valuation of the donation exceeds $5,000. For personal property Treasury Regulation Section 20.2031-6(b) requires that when any one article has a value exceeding $3,000, or if the total value of a collection of similar articles has a value exceeding $10,000, a residential or commercial appraisal must be filed with the return. As an executor of a decedent's estate you will most likely be using tax form 1041, 1040(e), 706 , OR 706A to figure the estate tax imposed by Chapter 11 of the Internal Revenue Code or for gift tax form 709.

Choosing an Appraiser

When choosing residential or commercial appraisers you should find an experienced appraiser and one that is familiar with IRS Real Property Valuation Guidelines. Treasury Regulation Section 20.2031-1(b) requires the residential home or commercial appraiser to follow certain guide lines when preparing a residential home or commercial appraisal for tax purposes or retrospective date of death valuations. Moreover, the appraiser must be qualified under regulations Section 1.170A-13(c)(5). Additionally, information that should be stated in the appraisal is set forth in Rev. Proc. 66-69, 1966 C.B. 1257. For example, utilizing the correct definition of "Market Value", "Use Value", "Fair Market Value", "Intrinsic Value", or "Investment Value" means the difference between a disputed appraisal and one that is prepared correctly. Anselmo v. Commissioner, the Court states there is no distinction between the measure of "Fair Market Value" for estate and gift tax purposes and charitable contributions. In addition, Rev. Proc. 79-24, 1979-1 C.B. 565 indicates guide lines for the "Market Approach" also known as the "Market Comparison Approach", better known in appraising for federally related transactions as the "Sales Comparison Approach". Similarly, Rev. Rul. 68-609, 1968 C.B. 327 provides the general approach, methods and factors outlined in Rev. Rul. 59-60, 1959-1 C.B. 237. All of these requirements should be met when preparing date of death appraisals.

Any opinion of value (appraisal) prepared by a certified or licensed residential home or commercial appraiser and used in documents filed with the revenue authorities should be well supported by a detailed report as to how the appraiser arrived at his conclusions. Such a report should demonstrate to the user that the appraisal is well founded, substantiated, and meets with Treasury Regulations and state agency requirements. It is also wise to avoid submitting an appraisal that is more than two years old and one that does not meet other specific IRS guide lines. Additionally, the IRS looks at the accreditation of the appraiser, the rationale of the "Fair Market Value" opinion, the validity of the comparable research, and the overall professionalism of the appraisal report.

Establishing Basis

As an appraiser, we are often called upon to prepare a date of death appraisal for an estate or trust to establish "basis" for estate tax liability or trust purposes by a certified designated residential or commercial real estate appraiser. If the property was acquired from a decedent the basis is typically the fair market value on the date of the decedent’s death (I.R.C. § 1014). An alternative valuation date may be chosen by the executor that is six months after the date of death, and typically, only if a tax savings can be shown by your tax preparer, accountant or real estate attorney.

Forensic Retrospective Appraisals

Often, the date of death (effective date of the appraisal) differs from the date of the inspection and the date of the appraisal report. As experienced real estate appraisers we are familiar with the procedures and requirements necessary to perform a residential or commercial appraisal with an effective date and a retrospective " Fair Market Value" opinion matching the date of death.

Additionally, multiple listing and many commercial real estate data base services often purge data after 3 or 4 years. Therefore, if an the effective date of an appraisal is over 3 years the appraiser must be aware of other residential or commercial data sources and how to utilize those data sources to obtain verifiable comparable sales information.

Avoiding Penalties

You may be liable for additional penalties if a property is over or under valued. Penalties can range from approximately 20% to 40%. In preparing a date of death appraisal for estate tax return filing purposes the IRS requires the appraiser to follow IRS Real Property Valuation Guidelines and specific appraisal guidelines. In addition, it is also important to provide a well documented home appraisal or commercial appraisal with the appropriate valuation techniques, especially if fractional interests (blockage and fractional interest discounts) are involved. In some cases this could mean the difference of whether or not the respondent is required to pay additional estate tax.

Reviewing the Appraisers Credentials

We believe appraisals prepared or supervised by a Member of the Appraisal Institute are among the highest quality in the appraisal industry. Appraisal Institute Members who hold the highest industry appraisal designations have the necessary real estate educational background and years of appraisal experience needed to properly complete appraisals. Warren K. Hoppke,SRPA Principal of APPRAISERVALUES.COM is a Member of the Appraisal Institute and a Senior Real Property Analyst and has over 30 years experience in both residential and commercial appraisals.

Attorneys, accountants, financial planners, executors and others rely on AppraiserValues.com for "date of death" and trust appraisal services because we have years of experience and training in preparing residential and commercial appraisal reports. Utilizing the correct definition of "Market Value" or "Fair Market Value" is just one of the many guide lines that we follow in preparing valuations for tax purposes.

Real estate isn't like publicly traded stock or other items which fluctuate in value daily. You need a professional California commercial real estate appraiser to determine "Fair Market Value", who is bound by the Uniform Standards of Professional Appraisal Practice (USPAP) for a high degree of confidentiality and professionalism. Additionally, you need the kind of quality report and work product IRS and taxing authorities, courts, and real estate attorneys want and expect.

For more information click on estate Tax appraisals or expert witness. Please browse our website to learn more about our qualifications, expertise and services offered.

By Robert J. Bruss
Inman News

Here are some additional issues that frequently arise regarding principal residence sales:

1 – Principal residence sale in the year of a spouse's death. IRC 121(b)(2) says the $500,000 principal residence sale exclusion is available for the sale of the marital home if the sale closes in the tax year of a spouse's death. Although the IRS considered extending this time limit beyond the year of a spouse's death, it found there is no authority to do so without the approval of Congress. The tax reason is that a surviving spouse can only file a joint tax return with the deceased spouse for the tax year of that spouse's death, but not in future tax years after that.

Purchase Bob Bruss reports online.

However, this is not such a "big deal," as many surviving spouses believe. If the surviving spouse inherits the deceased spouse's half of the home, the surviving spouse receives a new basis on that inherited 50 percent "stepped-up" to market value as of the date of the spouse's death. If the principal residence is in a community property state, the surviving spouse usually receives a new stepped-up basis on 100 percent of the home's entire market value on the date of death.

This stepped-up basis for the deceased spouse's interest in the home usually is far more important than the $500,000 principal residence sale tax exemption, which is available only in the year of death when a joint income tax return can still be filed.

The only time the surviving spouse is usually hurt financially occurs if title to the residence was held in the name of the surviving spouse alone so there was nothing to inherit from the deceased spouse. Then the surviving spouse does not receive a new stepped-up basis because he or she already held full title.

2 – Holding title in a living trust doesn't change eligibility for the $250,000/$500,000 exemption. When title to a principal residence is held in a trust for the benefit of the trustor, such as a living trust that avoids probate costs and delays, the method of holding title is disregarded for purposes of IRC 121 tax exemptions. "The sale by the trust will be treated for federal income tax purposes as if made by the grantor," IRS regulations explain.

3 – Sale of a partial interest in a principal residence won't increase the exemption. At the time a qualified principal residence owner sells a partial interest in the home, such as a sale to a son or daughter, that sale can qualify for the $250,000 or $500,000 exemption.

But this is not a tax loophole to allow the seller one exemption for a partial sale now and another exemption in the future when selling another partial interest. The IRS regulations clearly state that the maximum $250,000/$500,000 exemptions cannot be exceeded when selling partial interests in the seller's principal residence.

4 – Exempt principal residence sales need not be reported to the IRS. The IRS regulations state: "Reporting of an excluded gain is unnecessary and would be unduly burdensome for taxpayers."

However, if your principal residence sale is partially taxable, such as when your capital gain exceeds the $250,000 or $500,000 exemption, your home sale should be reported on Schedule D of your federal income tax returns, clearly showing the exclusion amount.

Summary: The $250,000 and $500,000 principal residence sale capital gain exclusions are major tax benefits for home sellers who understand how to maximize their exemptions. More details can be found in the IRS Regulations at IR-2002-142, available on the IRS Web site at www.irs.gov/newsroom with a link to the IR regulations as published in the Federal Register.

(For more information on Bob Bruss publications, visit his
Real Estate Center).

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Executor (Executors) An executor is the personal representative, executor, executrix, administrator, or administratrix of the deceased person's estate. If no executor is appointed, qualified, and acting in the United States, every person in actual or constructive possession of any of the decedent's property must file a return. If more than one person must file, it is preferable that they join in filing one complete return. Otherwise, each must file as complete a return as possible, including a full description of the property and each person's name who holds an interest in it.

We provide appraisal services for federal and state estate tax return filings, charitable donation, inheritance tax, financial planning of an estate or living trust, tax liability requiring an appraisal for IRS purposes, disposition of an asset under a will or in probate, tax law and litigation support, retrospective appraisal as of the date of death, an IRS 706 tax filing, setting up a family trust or family limited partnership, partnership disolution, partitioning of property in an estate or trust, fractional interests, partial interests, revocable living trust, charitable remainder trust, gift 709 tax filiing, tax liens, tax law appeal, alternative valuation date 706-NA tax return filing, appraisals for litigation purposes including real estate expert witness testimony and real estate litigation support services.

Disclaimer: All information that we provide on our web site is of a general nature. It is not intended to address the circumstances of any particular individual or entity. Even though we strive to provide accurate and timely information, we do not guarantee that such information is accurate. No one should act upon such information without appropriate professional advice after a thorough examination of the facts of their particular situation. We are real estate experts and not attorney's, tax professionals, financial planners or accountants. The above is not intended to give advise on legal, tax, financial planning, or accounting matters. Please check with your attorney, tax advisor, financial planner, and accountant for information regarding said matters.

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