Inherited land - sold - appraisals

Technical topics regarding tax preparation.
#1
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I have two clients with nearly same situations:
Someone died with land, 4 people inherited the land (1/4 each), and then the land was sold. My client is one of the 4 people who inherited - received a 1099S for the proceeds of their portion of the land.

I have an appraisal but have not dug any deeper than that.
I guess I need to know the following first:
1. Date of death of individual who died
2. When the appraisal happened compared to death (need to be within 6 months?)

If appraisal is within 6 months of death I guess I can just use that as basis divided by 4?
If a loss occurs, is that a capital loss? One clients land was farm land, the other not sure on
What if appraisal was not within 6 months?

Sorry, know there is a lack of facts, but just need to know where to take off from
 

#2
taxcpa  
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DOD is always the first question. Second is to find out if an estate was opened. If so, there should be an inventory with the value of the land shown.

If not, then an appraisal done as of the DOD is needed. As to capital gain/loss, I first ask if there was any personal use of the property. If the farm has a house, did any of the heirs live there after DOD? Did any related parties live there? Was it used as a rental? Etc, Etc. Etc.

Got a similar situation this year too. Need to get the basis right.
 

#3
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Values shown on an estate inventory are not evidence of fair market value.
Steve
 

#4
sjrcpa  
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Sort of depends on the probate jurisdiction, doesn't it?
Some will accept anything. Some require appraisals. Some want something in between.
 

#5
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It's "incompetent" evidence because it's an informal estimate by a non-expert. There's no a priori reason to think that estimate is more accurate than your estimate. Internet valuations are more reliable.
Last edited by gatortaxguy on 26-Mar-2023 6:38pm, edited 1 time in total.
Steve
 

#6
Frankly  
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I have an appraisal but have not dug any deeper than that.

If you have a real appraisal, i.e. one prepared by a licensed real estate appraiser, it "should" have been done with FMV as of the date of death. That is what sets the basis. Maybe the "appraisal" was really a "market analysis" done by a real estate sales person? Maybe the appraisal was done (for some unknown reason) prior to death? The closer the appraisal date to date of death, the better. Maybe 6 months gap is OK, but what happened in the interim? Hot market? Hurricane damage?
 

#7
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The date of the appraisal report was 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.

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

appears the comparable properties sales were in 2020 and one in 2021

somethin tells me this isn't going to cut it. :shock:
 

#8
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Deal with it any way you feel comfortable. Make a good faith effort within your budget. For example, you could take a reliable number as an anchor (i.e., an appraisal or a sale) and adjust via some indicator of market changes.
Steve
 

#9
sjrcpa  
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The appraisal valued the property as of the date of death. That's what you want. Of course it was done after the date of death. What more do you want?
I could get an appraisal today for the value of property 10 years ago.
 

#10
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I thought the appraisal would have to be done within 6 months of death?

Actually I may just be an idiot... looks like there are two 1099S's... the appraised value is less than the combined of the 1099s so there likely is a gain.

That makes sense... but back to the appraisal... so the appraisal can be done at any time as long as its valuing property around that date of death? so could you just keep getting new appraisals until it comes out how you want it?
 

#11
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The DOD value doesn't change. You're over-thinking this...
Steve
 

#12
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so take my appraisal provided by client and roll with it is what you're saying?
(I accountant over think everything)
 

#13
Frankly  
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TaxMeSideways wrote:I thought the appraisal would have to be done within 6 months of death?


A retrospective appraisal looks back to the desired date and provides FMV as of that date, using comparable sales and other factors relevant to the desired date, in this case the date of death. A retrospective appraisal can be done any time later - the historical data as of date of death doesn't change.
 

#14
cotopop  
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You might consider getting to the bottom of why you have 2 separate 1099's for the sales proceeds . This is unusual

Also don't forget to add to the adjusted cost basis the amount of qualified closing costs .As a result you will probably have a loss on the sale .

Your client might consider contacting the 3 other beneficiaries and see what they have for the date of death FMV.
 

#15
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On one of these clients, the opinion value is dated about 1 year after the death, but there is a note saying " It is an extraordinary assumption that the subject property as of 'date of death' was similar to the property as of the date of observation. The use of this extraordinary assumption might have affected the assignment results."

Would this hold up as being equivalent to the opinion value date being the date of death?

The comps consist of sales dates both before the date of death and after date of death
 

#16
JAD  
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We are not appraisers. We rely upon appraisers to provide values. I don't provide values, and I don't adjust an appraiser's valuation based upon my opinion. As stated above, it is perfectly normal for an appraisal to be done long after the fact. That is no big deal.

" It is an extraordinary assumption that the subject property as of 'date of death' was similar to the property as of the date of observation. The use of this extraordinary assumption might have affected the assignment results."

If it were me, I'd follow up on this. I haven't seen that before. Does the appraiser put that in every report? Is your client aware of work done on the property after date of death and before the appraisal? That is the issue. Did they remodel the kitchen? If they did, then valuing the property based upon how it looks now would cause the value to be too high. On the other hand, there would be an increase in basis due to the remodel costs.
 

#17
sjrcpa  
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I've never seen that language either.
Did something happen in that area between date of death and the date the appraiser did his work?
 

#18
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The taxpayer thought that language had to do with the opinion of value being $400,000 as of 6/1/2021 but the date of death was 5/10/2020. So instead of the opinion valued date being as of the date of death (5/10/2020), its as of 6/1/2021 but with that language acting like its the equivalent?

That is the best I've got right now and thats what the taxpayer thought that language was for.
 

#19
Nilodop  
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That's weird. That appraisal is no help. Why isn't it as of date of death?
 

#20
Frankly  
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"It is an extraordinary assumption that the subject property as of 'date of death' was similar to the property as of the date of observation. The use of this extraordinary assumption might have affected the assignment results."

That statement likely refers to the physical condition of the property at the date of observation. The appraiser may not know about things that may have happened to the property between DoD and the later date of observation. Was a new roof put on? Damage from neglect? Infested with rats? Hard to tell what the actual condition was at DoD. Easy to find comparable sales at DoD and adjust for differences like square footage, property features, swimming pool, etc.
 

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