Inherited land - sold - appraisals

Changing the facts?

So this appraisal report was prepared over a year after date of death and also after the sale which was on 8/19/2022

so lets round this up
date of death - 7/4/2021
opinion of value of property - $450,000
opinion as of - 7/4/2021
property sold on - 8/19/2022
appraisal report date - 11/5/2022

The "defined value of the property as of 7/4/2021 is $450,000" - which is the date of death. It was done by a licensed appraisal.

Yes, this example I’m cool with and applies to one situation in front of me. Opinion value being of the date of death = everything lines up based on everyone’s input above. Appraisal report lines up.

The other situation (situation 2) in front of me is the opinion value being a date other than date of death.a little over 1 year after date of death.

They need to get that appraisal redone with a FMV as of date of death.

There is no requirement to get an appraisal. Getting an appraisal is a cost-benefit business decision. And we're discussing a reporting position. Any reasonable, good-faith method will suffice. You're over-thinking this. Keep a record of how the number was determined and move on.

The other situation (situation 2) in front of me is the opinion value being a date other than date of death.a little over 1 year after date of death.

An appraisal as of a date over a year after DoD is worthless.

There is no requirement to get an appraisal. Getting an appraisal is a cost-benefit business decision. And we're discussing a reporting position. Any reasonable, good-faith method will suffice. You're over-thinking this. Keep a record of how the number was determined and move on.

The problem is potential preparer penalties if the valuation used on the return is determined to not be reasonable. I put myself at risk if I use some random number that is not properly documented. We also put ourselves at risk if there are penalties assessed to the client later. The client says that we prepared the return and should have known better than to accept that number. So it is a judgment call. Do I know the market? Am I confident that the value determined by whomever is reasonable? Am I willing to put myself out there for this when the client can just go pay for an appraisal? I am not. I don't care if the risk to me is remote. The client can get the proper documentation.

Like I said. It's a cost-benefit analysis. If the client declines and you're uncomfortable you can resign. What you can't do is tell the client it's required.

Like I said. It's a cost-benefit analysis. If the client declines and you're uncomfortable you can resign. What you can't do is tell the client it's required.

What is required is that the basis must be determined. It is "required" that the preparer use due diligence before writing some number on the tax return. It is required that the tax pro advise the client of the consequences of using an unsubstantiated SWAG number v. an appraisal from a licensed appraiser which will not be challenged.

I agree. Do you see your post as inconsistent with my post?

The FMV on date of sale assuming arm's length transaction, listing price, etc., is the sale amount. Absent extenuating circumstances (hot market, part of house caught on fire, etc) and appraisal, I cover my butt by looking at tax valuations and seeing if that is in the ball park. I may regress to 2-5% increase per year from DOD to sale date. Again, this is to make sure this passes the smell test. $1m basis and a 200k selling price generating a 800k loss doesn't pass the smell test absent some serious catastrophic event, which CAN be documented.

Don't over think it.

Getting an appraisal as of the date of death in order to establish the basis of the property is more than just a cost-benefit business decision.

If the appraisal is for the FMV of the property on the date of death, then I can rely on it. See sec. 10.22(b), Circular 230. However, if the appraisal is for the FMV of the property on a date that is one year after the date of death, then it is only a guideline in establishing the FMV on date of death.

If I choose to determine the FMV myself, such as by adjusting the value shown in the appraisal to account for the date difference or by using the internet, then I’m the one doing the valuation. If I’m wrong, then the client could sue me and would be successful since I’m not a licensed appraiser. If you want that malpractice exposure, then go ahead. Personally, I don’t.

This thread has become redundant.

Redundant, but I found it very helpful which is the point of participation. Thanks everyone for the input