Estate Cost Basis 6 Months After Death

[jaebert]

Want to run this by you..

Client wants to do valuation 6 months after Mom's death.
They have put in $40,000 in improvements since then, getting ready to rent it back out.
Shouldn't the value be based on the condition as of the date of death?
Even tho market may be better, to the estates advantage, to have a higher cost basis.
that's okay, I figure.

But now, with renovations as well, doesn't that artificially push the figures even higher? .
I can just tell them, their improvements help to rent the house, but do not count in the
valuation for cost basis purposes?

What say you?
James
Joe Morello Lives!

 

[erockinaz]

If you are doing a retrospective appraisal (based on 6 months after DOD), then you should appraise it as if it was not improved, the condition it was in 6 months after DOD. It is OK to interview the relatives, look at pictures, etc, state your findings in the addendum, and base your valuation of the hypothetical condition that the home is not improved. Make sure you state your HCs in the addendum and why you are making them.

 

[CindyR]

really would depend on what is the intended use of the appraisal and who is the intended user. then you can figure out whether there is a specific required effective date...

 

[Terrel L. Shields]

No, don't interpret law yourself. The IRS allows the use of either the date of death or six months later. Do what they say. It is not your job to interpret IRS law. It is fine to state when the improvements were made but doing it as if a DOD is wrong. That is not what they asked for and again, it is not your job to determine the conditions. If you think so, then read the IRS rules then call the IRS...not that they will tell you but the regulation is there at the IRS's pleasure. Also, it is not obvious whether this is an advantage or disadvantage. It may be better for the cost basis, but it may be worse for any pending estate tax. You are not a tax preparer. Just do what the written letter of engagement (you have one right?) says.

 

[Mike Kennedy]

Want to run this by you..

Client wants to do valuation 6 months after Mom's death.
They have put in $40,000 in improvements since then, getting ready to rent it back out.
Shouldn't the value be based on the condition as of the date of death?
Even tho market may be better, to the estates advantage, to have a higher cost basis.
that's okay, I figure.

But now, with renovations as well, doesn't that artificially push the figures even higher? .
I can just tell them, their improvements help to rent the house, but do not count in the
valuation for cost basis purposes?

What say you?
James
Joe Morello Lives!

Recommend your client immediately consult an Estate Attorney. IRS allows actual D.O.D. OR 6 mos after (typically used IF market value trends DECREASED since the DOD).

pls clarify "since then"
a. improvements were made within the 6 months after D.O.D. OR

b. the improvements were made AFTER the 6 mos. grace period occurred?

 

[Peter LeQuire]

The advantage/disadvantage between a DOD appraisal and one done DOD+6 months is the value that is reported to the IRS. This value becomes the basis for determining whether there will be a gain or a loss if and when the property is sold.

 

[sail143]

Value the property as requested. As Terrel said, do not decide what is best for them. A higher value could easily be to their advantage in the long run. They are filing the return, not you.

 

[Elliott]

When you value an estate, you have an option of valuing based on the date of death, or six months after the date of death. With stocks, you look up their value on the two dates.

Who paid for the $40,000 in improvements? If it came from the "estate" then I would think it would have a net effect. If the cost of the remodeling came from a source outside of the estate, then I would think it would be reasonable to base the valuation on the date six months from the date of death and exclude the $40K.

I'm not a tax expert, I do not give tax advice that should be relied on, but I have been a PR for an estate that relied on the six month alternative valuation.

 

[Tom D]

i would also ask the purpose of the improved valuation verses the dod "as is" value. could be a wholly different reason than estate tax purposes. who knows if there are a bunch of relatives arguing & what they are trying to figure out. that's not figuring out what's best for them, it figuring out what is the "mistake purpose" free appraisal for you to be doing. when your mind is questioning, it's better to ask them more questions. less trouble than the questions the board may ask you to answer.