Date of Death (Estate)

Estate Appraisers, Step Up Basis Retrospective Date, Tax Real Property Estate Tax Valuations, Los Angeles, Orange County, San Diego, Riverside County, San Bernardino County, Ventura County                                                                                                                              

There are many situations where you need an experienced, qualified, and licensed appraisal expert to determine the retrospective “Fair Market Value” (FMV appraisal) of real property in your estate as of the date of death. Many estates consist of a portfolio of commercial, industrial, and residential real estate need to establish stepped up real property tax basis for IRS tax filing purposes. Determining fair market value of your estate as of the date of death can establish basis. In addition you may need a valuation expert to determine the appraised value of fractional ownership interests of the estate.

Estate Tax and Appraisal

As an executor or administrator of an estate you have been entrusted to carry out the wishes of the deceased estate plan as swiftly and exactly as possible. Federal estate tax returns are required whenever the total value of the decedent’s assets exceed the applicable filing thresholds. Effective for 2009 if the total value of a decedent’s assets exceed $3,500,000, a Federal estate tax return will be required; for 2010 the estate tax has been repealed; for 2011 $5,000,000 exemption and a maximum top tax rate of 35%, and for 2012 it will go to $5,120,000 exemption with a 35% tax rate, and for 2013 $5,250,000 with a 40% estate tax rate, and for 2014 $5,340,000 with a 40% tax rate.

The IRS has issued a new Form 8939  Allocation of Increase in Basis for Property Acquired From a Decedent and is due November 15, 2011. The form provides guidance to an executor of an estate on the treatment of basis for certain types of estates who died in 2010 to opt out of the estate tax and have the carryover basis rules apply. The new form must be attached to the decedent’s final 2010 return if the decedent’s gross estate exceeds $1.3 million. The failure to do so could subject the taxpayer to a $10,000 penalty. It is probably good practice to attach the 8939 form even if not mandatory for several reasons: (1) beneficiary basis can be established (2) to initiate a 3-year period for valuation challenges by the IRS.

For gift tax when the valuation of the gift exceeds $13,000.  Generally, for personal property appraisals Treasury Regulation Section 20.2031-6(b) generally requires that when any one article has a value exceeding $5,000, or if the total value of a collection of similar articles has a value exceeding $10,000, an appraisal must be filed with the return. As an executor of a decedent’s estate your attorney, accountant, CPA, or tax professional will most likely be filing tax forms 1041, 1040(e), new 8939, takes the place of 706706A to figure the estate tax imposed by Chapter 11 of the Internal Revenue Code or for gift tax form 7091099-R and 5498.

Choosing an Appraiser for Estate Planning

New IRS Tax Return Regulations (26 CFR part 1) requires taxpayers to obtain a “qualified appraisal” on real property by a “qualified appraiser” as per IRC Section 170(f)(11)(E)(iii)(ii).  The IRS has defined the appraisal standards that must be met along with verifiable minimum education, has earned an appraisal designation from a recognized organization, and/or have equivalent experience in valuing the type of property being appraised. The residential or commercial appraiser must have experience with IRS Real Property Valuation Guidelines. Treasury Regulation Section 20.2031-1(b) requires a residential or commercialappraiser to follow the valuation guide lines when preparing a residential home or commercial real estate appraisal for tax purposes or retrospective appraisal. Moreover, the appraiser should hold a designation and be qualified as stated under regulations Section 1.170A-17(a) .  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 death tax appraisals.

Any opinion of value (appraisal) prepared by a certified or licensed residential home or commercial real estate appraiser for use in planning an estate and 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 for Estate Planning Purposes

As an appraiser, we are often called upon to prepare an 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.

Retrospective Commercial Appraisal

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 designated experienced real estate appraisers we are familiar with the procedures and requirements necessary to perform residential or commercial appraisals that match the retrospective effective date of value.

Because multiple listing services 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

Taxpayers may be liable for additional penalties if the valuation does not adhere to IRS Real Property Valuation Guidelines. Penalties can range from approximately 20% to 40%. In preparing an appraisal for estate tax return filing purposes the IRS requires the appraiser to followIRS 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 interest & blockage discounts  or other interests are involved. In some cases, this could mean the difference of whether or not the respondent is required to pay additional estate tax. Moreover, if the estate tax is later challenged in a court of law, the appraiser must be qualified to testify as an expert witness on behalf of the respondent.

Reviewing the Appraisers Credentials

We believe appraisals prepared or supervised by a Member of the Appraisal Institute are among the highest quality appraisals in the 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. The principal of AppraiserValues is a Member of the Appraisal Institute with experience in both residential and commercial appraisals.

Attorneys, accountants, financial planners, executors and others rely on AppraiserValues for retrospective real estate valuations and trust appraisal services because we have years of real estate 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 IRS guide lines that we follow in preparing valuations for estate planning and tax purposes.

Real estate isn’t like publicly traded stock or other items which fluctuate in value daily. You need a professional designated 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.

Fractional Interest Valuation

Real estate can be held under various forms of ownership including co-tenancy (undivided fractional interests), partnership, LLC, Q-Tip Trusts, and other forms of ownership. The type of ownership can affect the valuation.



Executor (Executors)   An executor is the personal representative, executor, executrix, trust administrators, 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 tax 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 tax return as possible, including a full description of the property and each person’s name who holds an interest in it.

We provide real estate appraisal services for federal and state estate tax return filings, charitable contribution, gift planning, donation, donee beneficiary, inheritance tax planning, financial planning of an estate or living trust, trusts & wills, family trust, tax liability requiring an appraisal for IRS purposes, disposition of an asset under a will or in probate, estate planning attorney services, law and litigation support, retrospective appraisal, IRS 706  filing, setting up a family trust or family limited partnership (FLP), partnership dissolution, corporation asset valuations, appraisal services for partitioning of property in an estate or trust, fractional valuations, partial interest, revocable living trust, charitable remainder trust, gift 709 filing, tax liens, tax appeal, probate, bankruptcy, alternative valuation date 706-NA tax return filing, appraisals for litigation purposes including real estate expert witness testimony, tax attorney appraisal services, 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 advice on legal, tax, financial planning, or accounting matters. Please check with your attorney, tax advisor, financial planner, and accountant for information regarding said matters.