Deconstruction Appraisals

[Elliott]

FYI--a 4 year thread on donating to fire departments:

http://www.taxalmanac.org/index.php/Discussion:Donation_of_House_to_Fire_Department

My favorite post is "Crow -- don't forget to take out the copper pipes before you burn it. Might be enough to buy a few cases of PBR."

I'm trying to figure out how one makes value out of whole cloth (and why tax payers
get to foot the bill)....but I guess my question is, So I pay a charitable organization
$2000 to tear down a house. They take the materials to a salvage yard and they
give them $10,000. So now the charity has $12,000 of funds. So explain how I
get my $50,000 deduction? I guess I could have salvaged it myself paying 2009
college graduates $3,000 and taking it myself down to the salvager and getting
the $10,000 in cash.

I confess, I'm just dense about how one comes up with the market value of falling
down houses or improvements that don't contribute to the H/B use of the property.

 

[jay trotta]

Elliott

after reading the link you posted, some years back I remember reading something with the IRS and another document regarding loss of value. I will see if I can locate it, but if I rember correctly it goes something like this;

Establish the Value prior (BEFORE) to - "As Is" and then after the transfer; in the case being discussed you have a whole property - Land / Foundation / Structure and Improvements. To find the Value of the Structure alone, all other improvements need to be accounted for and therein lies the crux of the dilema. Once you have found all associated costs, you need to arrive at a Value for what is left AFTER the removal.
The process everyone is seeking in this case is known as; Diminution of Value and there are specifics to finding the Loss (so to speak). From what I've read so far, the IRS can have a "tea party" with anyone who has Claimed or is about to Claim a Deduction, because I will venture a guess that everyone to date has approached the "appraisal problem" Incorrectly, even the accountants (your link).

This benefit of knowledge is provided by "Snowglobe Enterprises" and remains the intelectual property rights of "J.F.Trotta, Trotta Appraisal & Consulting, LLC" - and may not be used by anyone without prior written permission by the sole owner of these intellectual copy writes.

If you have peeked, you have infringed - Mr Feets, you will need to write me soon

cheers,

 

[UpstateNY]

Elliott - I'm not saying that I agree with the tax benefit, because I'm fed up with high taxes too. This program is out there whether I like it or not, and it appears that it's going to be more common to de-construct a building than it is to knock it down and haul it to the landfill, which here costs $80.00 per ton. The money part goes like this:

1) The charge from the non-profit organization to de-construct is the same as the cost to demolish it, BUT, you will save the $80.00/ton landfill charge (that is the cost here). For an average sized home that would be about $3,000, from what I have read.

2) The deduction is equal to the price that the organization charges for the materials when they sell them from their "lumberyard". So, if they charge $2.00 for a 2x4, and there are 500 2x4's donated, then that is $1,000 towards the total donation. Start throwing in hardwood floors, rafters, joists, doors, windows, etc., then it can add up. Let's say it's $10,000 total. In a 30% tax bracket that's a $3,000 value, plus the money saved for the landfill charges.

So, for the donor, they are $6,000 ahead, a no-brainer. Now, the reason I posted in the first place is because I have seen other methodologies used that triple that number, for the same house. Personally, I won't follow those methods, because after reading the IRS guidelines it's a very gray area.

Like I said, they are my tax dollars too, but if these things are as easy to do as punching in quantities from a materials receipt, and using the price list from the organization, it's a 1-hour job or so that a lot of appraisers will be making $$$ on. The ones that get there first will get the lion's share. I do commercial work only, and typically have 5 in the queu, so I don't need it, but if someone will pay me say $350.00 - $500.00 for a 1-hour "form-fill", then I guess I'll do them.

Mike - I read the instructions from the IRS website for the donation form. It appears that the above method of using the asking price is acceptable, since it is fair market value.

 

[Elliott]

http://www.conservationcenter.org/assets/docs/IsDeconstructionCheaperThanDemolition_000.pdf

So I get a $2 deduction for a 2x4 that it took a volunteer 15 minutes to reclaim and
knock out the nails and haul to the salvage yard. And the salvage yard pays what
for it and the charity puts the money in its pocket?

Based on the article, I just need to find Vic the Appraiser who will say the
refrigerator I donated cost $8000. Seems like I remember Hillary and Bill
got audited and claimed a clothing donation on Bill's old clothing to Good Will.
He gave his old underwear and assigned a value of $10 per pair of shorts.

 

[Mike Boyd]

Keep in mind that if the appraiser says in his report that the "2 X 4" is worth $2.00 and the IRS finds later that it is worth only $1.00, this same appraiser will be fined for the difference of $1.00 for each 2 X 4. Not as easy as it appears and certainly not risk free. It is up to the appraiser to verify the retail value of each component being donated to the charity. A list from the charity does not qualify as verification. Think about all the components of a house that are salvageable.

 

[Elliott]

Well, I got curious. What is a 'deconstructed' 2x4 cost?

"Day 4 Treated and regular lumber; 12ea. 2.5'-2x4, 5ea. 2'-2x12, 6ea. 3'-1x4, 2ea. 4'-1x6, misc. 4x4 & 2x2.
Total retail ~$25 FREE and they helped me load, nice people!"

But wait, there's more. EPA Case Study. A old 1940's barn was
worth *kirchang* a $2647 'deduction' (less the cost of the appraisal?).

http://www.lifecyclebuilding.org/files/ReStore%201940%20Barn.pdf

 

[Mike Boyd]

Well, I got curious. What is a 'deconstructed' 2x4 cost?

"Day 4 Treated and regular lumber; 12ea. 2.5'-2x4, 5ea. 2'-2x12, 6ea. 3'-1x4, 2ea. 4'-1x6, misc. 4x4 & 2x2.
Total retail ~$25 FREE and they helped me load, nice people!"

But wait, there's more. EPA Case Study. A old 1940's barn was
worth *kirchang* a $2647 'deduction' (less the cost of the appraisal?).

http://www.lifecyclebuilding.org/files/ReStore%201940%20Barn.pdf

Barn board siding is primo. In older structures it is usually redwood or cedar and extra wide.

Same with structural timbers. However, those must be re-graded by a lumber specialist licensed to do grading.

 

[Vermonter]

My neighbor sold a crooked 20'x30' two story barn with slate roof to a barn reclaimer for $25,000 last year. Guy turns them into new timber-frame homes/cottages.

We have a couple local non-profits that do this kinda stuff. It is by no means cheaper than just hauling it all to a landfill, and I was under the impression the materials reclaimed were not worth all that much. Especially now that new construction materials are super low.

Interesting supplemental business opportunity tho.