Guidance request--appraisal for IRS audit

[shrubberyvaluation]

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.

Make sure you know what the IRS needs. We are typically engaged by a tax attorney and they (should) know what they need for the appraisal.

 

[sputnam]

Not that difficult an assignment, imo... although, finding an appraiser to take it on might be difficult. There will be before and after comparable sales... or not. If not, it's on to doing a depreciated cost analysis.

 

[J8012]

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...

II 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!

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!

I assume your are referring to Edenville? Very unfortunate. Given the magnitude of the effects I would reach out to the prominent local accountant/attorney as you are undoubtedly not the first person with this issue. Also, I am vaguely familiar with your situation, I would ask about the property tax reduction via your local tax authority and the upcoming special assessment for the repairs to the dams. Also as of my last visit to Wixom lake values had sustained relatively well given the circumstances but the changes in our current environment with inflation and interest rates I suspect this will change rather quickly. Truth be told you have numerous possible grievances beyond the dock. Best wishes.

 

[Cob]

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!

IMO, you need a good attorney or insurance adjuster and NOT an appraisal.

 

[Zephyr999]

IMO, you need a good attorney or insurance adjuster and NOT an appraisal.

The appraisal is primary to the solution in these circumstances. Damage are estimated from differences between the before and after. Appraisers with this expertise exist...fixing an IRS tax filing after the fact is a secondary problem.

 

[Cob]

The appraisal is primary to the solution in these circumstances. Damage are estimated from differences between the before and after. Appraisers with this expertise exist...fixing an IRS tax filing after the fact is a secondary problem.

As I stated in my post IMO which stands for "In my Opinion" that's my opinion, it is "my opinion" to have an attorney contact the IRS to ask why an audit was requested as well as an appraisal, a LOT of times that resolves the issue, but again, that's just "my" opinion, there has to be a reason there was an audit along with a request for a formal appraisal.

 

[Zephyr999]

As I stated in my post IMO which stands for "In my Opinion" that's my opinion, it is "my opinion" to have an attorney contact the IRS to ask why an audit was requested as well as an appraisal, a LOT of times that resolves the issue, but again, that's just "my" opinion, there has to be a reason there was an audit along with a request for a formal appraisal.

Reason for audit--no support for deduction.
Reason IRS requesting the appraisal--in order to take the value loss an appraisal is required as the support
This is the IRS process and procedure, spelled out in their Publication.

 

[jay trotta]

Reason for audit--no support for deduction.
Reason IRS requesting the appraisal--in order to take the value loss an appraisal is required as the support
This is the IRS process and procedure, spelled out in their Publication.

Agreed, even if he originally had a CPA

 

[Cob]

Reason for audit--no support for deduction.
Reason IRS requesting the appraisal--in order to take the value loss an appraisal is required as the support
This is the IRS process and procedure, spelled out in their Publication.

So the IRS is requesting an appraisal JUST for the dock or the entire property including the dock?

 

[Zephyr999]

So the IRS is requesting an appraisal JUST for the dock or the entire property including the dock?

Before - After = Estimate of Damages

or spelled out...

1) Property Retrospective Before with a functional dock minus Value of Property As-Is Effective Date equals the Estimated Loss or Gain of the dock. 2) There is a form the appraiser(s) sign as another MUST include when file to IRS.