DOD appraisal for estate -- what type of value?

[Tacoman]

" to determine Fair Market Value for Estate management purposes" is more general. Avoid the "restricted" moniker. GP form is OK. Definition is from IRS but, in this case, the IRS nor the state are an "intended user". The client and intended user is the executor of the estate. Retro to the Date of Death, hopefully comparatively recent - makes it easier. I actually had one several years ago that a trust had not been brought up since 1985 and I had to go to the courthouse and dig out old sales in a file cabinet.

Why is it a good idea to avoid doing a restricted report? I don't have much going on so I'm doing the same amount of research and building the same workfile. I'd actually be more comfortable writing more than just statements anyway. Is it because the client would likely be unfamiliar with an appraisal and would benefit from additional detail? Or because the IRS could potentially want to see it someday?

 

[nachocheesefries]

5-yr sales history

What's this? For IRS? On subject or comps, both? I did not know.

 

[Terrel L. Shields]

A couple of attorneys that I've done estate work for have told me that as long as the market is essentially the same, there's no problem going beyond the DOD

The IRS somewhere simply states sales should be as close to the date as possible, but I have had CPAs kick back insisting the sale be closed prior to DOD.

 

[Terrel L. Shields]

Why is it a good idea to avoid doing a restricted report?

If the IRS does review the return, they will want to see the report. And they do not want to see a Restricted report. They want to follow your logic. If they encounter a restricted report, they wonder what you are hiding and will demand the workfile. You don't want to be there.

4 Tips to Make Sure Your Estate and Trust Appraisal is Accurate

When you include an appraisal with your estate, it comes under intense scrutiny. Every detail of the appraisal, from its quality to reliability, is …

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Once completed, your report should meet all the requirements mentioned earlier for a qualified appraisal. For real estate, it is recommended that the appraisal is identified as an “Appraisal Report” and not a “Restricted Appraisal Report.”​

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The document should also:​

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• Be prepared in accordance with Generally Accepted Appraisal Standards (GAAS)
• Meet the relevant requirements of Regulations Section 1.170A-13(c)(3) and Notice 2006-96, 2006-46 IRB 902

 

[Vermonter]

In my experience if there is a lawyer/CPA in the mix it is best to ask the executor for their preferences. Saves you from revising things later.

The IRS somewhere simply states sales should be as close to the date as possible, but I have had CPAs kick back insisting the sale be closed prior to DOD.

Same. Lawyers/CPAs handling the estate prefer everything fitting into neat boxes just like lender UWs

 

[huntercharlie]

A couple of attorneys that I've done estate work for have told me that as long as the market is essentially the same, there's no problem going beyond the DOD by a reasonable amount of time. I've gone up to 30-60 days as long as the market was stable.

YMMV.

Those that were listed, and better yet in contract, as of the effective date...especially in a changing market.

 

[J Grant]

This is all very helpful, thanks everyone.

This is the intended use I'm putting in the engagement letter: "to assist the Client in establishing value for tax purposes." Would you recommend being more general?

You need a value defined for the type of value you are opening, and what value definition fits "establishing value for tax purposes?"??? What type of value ? It would be a no from my end to write that.

The purpose of the appraisal is usually is either market value ( or fair market value which states the IRS definition of MV , which is similar) or state some other form of value such as disposition value etc. The use (for tax purposes ) is the intended use, not the type of value sought.

The value definition used which defines the type of value is not just word salad. It drives the entire appraisal process.

The retroactive date is just the value as of X past date, there is good advice from this board among other sources. A simple internet search usually yields articles on the subject.

 

[Terrel L. Shields]

Why is it a good idea to avoid doing a restricted report?

So question first. Are you doing a restricted report in order to do the report faster? And what is in your workfile? So why not include it in the report, rather than invite someone to ask for additional data. Or, are you trying to hide something? Be honest.

What is the advantage of the Restricted Report? In the case of a gifting, certainly the Restricted report is verboten because the IRS is also an intended user. But for the DOD appraisal does not make the IRS an intended user. But I bet if they do decide to review the tax return and they encounter a restricted report, they will see if adequate then send their own appraiser out to look. And then the workfile better be pretty dang good. If you complete a report that is a summary - are you really going to save much time? You need to organize the workfile so you can defend it and then the question is, "Does the client understand a Restricted Report". If an heir to the property is the trustee and the client then they almost certainly DON'T have the requisite experience with appraisals to make heads or tails of the report.