Guidance request--appraisal for IRS audit

[vandort]

I could use some guidance from this group of experts. I live on a lake that was destroyed due to a dam failure. I had a boat dock that floated away during that flood. I claimed a casualty and loss deduction on my taxes for the dock by researching comparable used docks online ($6000). I've now been audited by the IRS for this deduction and they are asking for a formal appraisal.

I'm not been in this situation before and so I trying to figure out what to do. The local appraisers that I have talked to completed catastrophic house loss appraisals for this flood situation and not specifically loss of a dock. Is there someone within this network with this kind of expertise? I also don't think that I need the kind of documentation that is needed when applying for a mortgage (e.g. home appraisal). Are there different kind of appraisals that would fit this purpose?

Any thoughts or suggestions would be appreciated. Thank you!

 

[glenn walker]

I could use some guidance from this group of experts. I live on a lake that was destroyed due to a dam failure. I had a boat dock that floated away during that flood. I claimed a casualty and loss deduction on my taxes for the dock by researching comparable used docks online ($6000). I've now been audited by the IRS for this deduction and they are asking for a formal appraisal.

I'm not been in this situation before and so I trying to figure out what to do. The local appraisers that I have talked to completed catastrophic house loss appraisals for this flood situation and not specifically loss of a dock. Is there someone within this network with this kind of expertise? I also don't think that I need the kind of documentation that is needed when applying for a mortgage (e.g. home appraisal). Are there different kind of appraisals that would fit this purpose?

Any thoughts or suggestions would be appreciated. Thank you!

Did you claim the loss on your insurance ?- How did you arrive at $6,000 ? Give then Docs Online data you used and tell them that how you arrived at it --Talk to a CPA or your tax preparer -- Most docks in my area are personal property and not real property.

 

[Overimprovement]

I can see such an appraisal (especially with the IRS involved) being a 4 digit fee. I question whether the IRS has the right to even demand that. Do you have a tax attorney you can get some free or cheap advise from? I wonder if they are questioning, as Glenn said, if this is a real or personal property loss. Not that is still is not deductible, but perhaps in a different way.

The other issue at play is this--did your property as a whole lose value as a result of this flood? In other words, did you have nice lake front property, and now have nothing downed trees and mud? That could be a loss you have not even claimed yet. If it is a possibility--and IF you end up getting that appraisal, I would have the appraiser (who needs to be expert in waterfront property valuation) consider the value of your home BEFORE and AFTER the flood--dock loss, loss of value in use, and view loss, etc. This would be similar to an eminent domain appraisal--like when the government takes a portion of your land for a power line or road expansion.

Not sure who is responsible or who owns the dam in question, there may be more to your loss than the dock.

Maybe some CG on here can comment if they have some expertise in this area...

 

[Elliott]

If I were in your shoes, I'd consult an enrolled agent and CPA first, but I'd probably roll over because even if you get an appraiser to 'prove' a $6000 loss it will probably end up costing you half that amount in out of pocket cash for the appraisal and just for a $6K deduction is worth what ? .... a third of that? And will your 'standard deduction' kick in and even reduce it more?

 

[glenn walker]

The poster went AWOL -My guess is he/she has no CPA - No tax preparer or Enrolled agent and did this on its own. Now He/She/It has no idea what to do -I can figure a lot of ways to knock off $6,000 without raising
Red-Flags. Our accountant would have looked at me and said Forrest Gump shut up : )

 

[vandort]

The poster went AWOL -My guess is he/she has no CPA - No tax preparer or Enrolled agent and did this on its own. Now He/She/It has no idea what to do -I can figure a lot of ways to knock off $6,000 without raising
Red-Flags. Our accountant would have looked at me and said Forrest Gump shut up : )

I'm still here. And, yes, I do feel rather foolish now. I did file my own taxes. My taxes are not complicated and I followed the instructions in all of the IRS workbooks. There was no detail in the workbooks that said that I needed to have a formal appraisal nor did I think that I would create the situation that I am now in.

I did consult with a couple of local CPAs, my insurance agent, a tax attorney and some local appraisers. The local CPAs that I talked with told me that their clients provided the casualty and loss data to them. They did not collect the data nor were they responsible for it. The local appraisers that I talked with appraised home loss, not specifically a dock loss. There was a lot of destruction in my location community and many people loss their homes and more. To calculate the fair market value of my dock, I looked at comparable used docks online in my state and did the calculation myself. I do understand that some docks are "real property" while others are "personal property". However, I do not know if the definitions are the standard definitions or if this varies from one jurisdiction to another?

My home has lost value. However, I did not claim this. I used to have a lake house and now I have the view of a small river and a lake bed that is now filled with trees. My community to working raise funds to restore our lake, but as you can imagine this is lot of money (>$250MM) and is taking quite a bit of time.

Thank you for your comments and your suggestions.

 

[vandort]

To give you some context, please see the "after the flood" and "before the flood" view.

 

[glenn walker]

No offence

I'm still here. And, yes, I do feel rather foolish now. I did file my own taxes. My taxes are not complicated and I followed the instructions in all of the IRS workbooks. There was no detail in the workbooks that said that I needed to have a formal appraisal nor did I think that I would create the situation that I am now in.

I did consult with a couple of local CPAs, my insurance agent, a tax attorney and some local appraisers. The local CPAs that I talked with told me that their clients provided the casualty and loss data to them. They did not collect the data nor were they responsible for it. The local appraisers that I talked with appraised home loss, not specifically a dock loss. There was a lot of destruction in my location community and many people loss their homes and more. To calculate the fair market value of my dock, I looked at comparable used docks online in my state and did the calculation myself. I do understand that some docks are "real property" while others are "personal property". However, I do not know if the definitions are the standard definitions or if this varies from one jurisdiction to another?

My home has lost value. However, I did not claim this. I used to have a lake house and now I have the view of a small river and a lake bed that is now filled with trees. My community to working raise funds to restore our lake, but as you can imagine this is lot of money (>$250MM) and is taking quite a bit of time.

Thank you for your comments and your suggestions.

No offense but $200 to $300 bucks a Enrolled Agent would have prepared your return and in situations like this /He/She can represent your case with the IRS. BUT ones I work with would have told you to not make this claim as its a Big -Red flag. Time to quit trying to be a tax preparer as it will most likley take you 12 months or more to get it resolved--but pray they don't look for more issues on previous years returns. .

 

[Terrel L. Shields]

Are there different kind of appraisals that would fit this purpose?

A marine surveyor might be the right call. As for an appraiser, you would be looking at an ASA appraiser in terms on non-real estate. FYI a "marine surveyor" is a person who values boats and marine "stuff" - they don't "survey" per se. (or if in England an appraiser is called a "Chartered Surveyor"

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[The Warrior Monk]

The local appraisers that I talked with appraised home loss, not specifically a dock loss.

Appraisers don't appraise homes, they actually appraise property rights. I have personally appraised properties damaged by storms, involving bulkheading, docks. etc. When it comes to these situations, I have generally been engaged by an attorney or accountant, who tell me exactly what they need. Depending on the particular circumstances, it can vary from replacement cost, to before and after valuations (i.e., value of property with dock versus value of property without dock). It's very important to determine what is needed, because the appraisals needed can be expensive, and it is best to make sure that the correct valuation method is utilized from the outset.