IRS Definition of FMR

[ZZGAMAZZ]

It has been suggested to me that estate settlement appraisals should employ IRS definition of Fair Market Value re IRS Publication 561.

I have reviewed the IRS publication and am trying to determine the difference, if any, between the mortgage-related defintion of MV and the IRS defintion of FMV.

I've read several threads on the Forum that either pertain to the distinction based upon the OP, or that deviated into the controversy.

Nevertheless, is FMV the MV definition to use in estate appraisals?

And (possible a very dumb question) do all estate settlement appraisals need to indicate that the IRS is an intended user, or that implied? (I don't fully understand estate settlements although I don't THINK that goes to a lack of competence.)

 

[Wayne Tomlinson]

IRS did not order the appraisal. They are not your intended user.

The attorney or heirs or who eve is preparing the Estate return, if any, is your client and intended user.

The estate has to be over $2M before there is any tax due.

Most estate appraisals are to establish a new basis for the property for when it is sold.

If you use your definition of market value you should be OK

Wayne Tomlinson

 

[Kali the Boston Terrier]

All estates are subject to audit, appraisals used to determine the value of the estate will be a part of that audit. Which means that you are exposed to liability. If the estate is sanctioned because of poor reporting or incorrect appraisal valuation...whom do you think the heirs of the estate will go after when its your screw up?

I'm not sure of the threshhold when the IRS cares, but I do know this...when they want someone they will find anything. I plan on not being that 'anything', which means if my report may go to the IRS for estate settlement, donation, or gift tax I'm going to make sure I conform to their appraisal requirements. These requirements are not very difficult or cumbersome...they are just different then the typical GSE users.

My thought on the FMV vs. MV argument the IRS does not spell out specific appraisal requirements...except FMV and its definition. They clearly say in 561 we use FMV...hmm seems like an open and shut case to me.

 

[Pat Butler]

I have the client or their attorney/accountant decide which value definition they want. I've even typed out of the two definitions in the engagement letter and have them choose which one they want by intialing it. Bottom line- let the client make that decision for themselves. We aren't attorneys or accountants.

 

[jay trotta]

BK
My thought on the FMV vs. MV argument the IRS does not spell out specific appraisal requirements...except FMV and its definition. They clearly say in 561 we use FMV...hmm seems like an open and shut case to me.

Because the IRS Does Not Spell Out "Specific Appraisal Requirements" - it No longer is an "Open & Shut" case. Re-read FNMA/USPAP guidelines and make your decision.

I hope You make the right one.....hmmmm

 

[Mike Kennedy]

see 2006 attachment

(1)​

Qualified appraisal. An appraisal will be treated as a qualified
appraisal within the meaning of § 170(f)(11)(E) if the appraisal complies
with all of the requirements of § 1.170A-13(c) of the existing regulations
(except to the extent the regulations are inconsistent with § 170(f)(11)),
and is conducted by a qualified appraiser in accordance with generally
accepted appraisal standards. See sections 3.02(2) and 3.03 of this
notice.
(2) Generally accepted appraisal standards. An appraisal will be
treated as having been conducted in accordance with generally accepted
appraisal standards within the meaning of § 170(f)(11)(E)(i)(II) if, for
example, the appraisal is consistent with the substance and principles of
the Uniform Standards of Professional Appraisal Practice (“USPAP”), as
developed by the Appraisal Standards Board of the Appraisal Foundation.​

Additional information is available at http://www.appraisalfoundation.org.

 

[Fred]

I have the client or their attorney/accountant decide which value definition they want. I've even typed out of the two definitions in the engagement letter and have them choose which one they want by intialing it. Bottom line- let the client make that decision for themselves. We aren't attorneys or accountants.

That's right. We are appraisers, and if appraisers don't know what defintion to use and why, I don't see how they can accept the assignment. The SOWR requires the appraiser to determine the scope necessary, and that includes identifying the appropriate value definition.

Re-read FNMA/USPAP guidelines and make your decision.

FNMA?

I am with Brian. The client either intends to use the appraisal for taxes or they don't. The IRS is either an intended user or they aren't. Even if the client lies to you, at least be able to show you conducted due diligence.

 

[jay trotta]

Steve

Because no one knows where the assignment will end up and who will use it for their advantage, I would assume you would consider everything that is Typical of your daily business. Cut no corners and move forward; An estate appraisal should fall under the same guidelines we use daily, after all the "Estate" will need to produce a "Sale" of some type, either via a family member / a Realtor OR an independent Buyer.

By not meeting FNMA guidelines, you are not applying your everyday business practice, sort of like an accountant leaving out a portion of your Tax advantage. Would you not go back to chat with him/her ???

 

[Fred]

By not meeting FNMA guidelines, you are not applying your everyday business practice, sort of like an accountant leaving out a portion of your Tax advantage. Would you not go back to chat with him/her ???

I dont' follow.

Cut no corners and move forward; An estate appraisal should fall under the same guidelines we use daily, after all the "Estate" will need to produce a "Sale" of some type, either via a family member / a Realtor OR an independent Buyer.

The same guidelines I use every day do not include Fannie.

My point is don't assume it is for a sale and don't assume it is to establish value for taxation. Take steps find out.

If it is for a contemplated sale, I might well end up using a value defitnion similar to the ERC one (ainticipated sales price).

 

[Pat Butler]

We are appraisers, and if appraisers don't know what defintion to use and why, I don't see how they can accept the assignment. The SOWR requires the appraiser to determine the scope necessary, and that includes identifying the appropriate value definition.

See line 389, "communication with the client IS REQUIRED to establish most of the information necessary for problem identification."

Utimately the appraiser has to make the final decision as to what value definition is going to be used. However, that's after consulting with the client. I consult with the client and their attorney/accountant and let them tell me what their needs are. I then accept that definition as being the one that I'll use because its suitability was determined by a professional in the tax field, and I can now rely upon their professional advice just like I can rely upon the advice of other professionals for my data.

Some estate appraisals I've done are based upon retrospective dates while others were as of the date of inspection. Again, that determination is made by their attorney/accountant and then I can rely upon it. But no one expects an appraiser to be well versed in tax laws as to be making these decisions autonomously.