Land Appraisal for Charitable Donation

[Zoe]

Certified Residential - 1 to 4 Family

DOESN'T INCLUDE: land that cannot be developed

hard pass

Yeah, the City has a purpose if the owner can donate to them. H&B use analysis could be nightmare. No telling where you might have to go to find comps.

 

[Zoe]

JTip has experince working for jurisdictions in appraisal services. @Tiffany Gibbons does too. You might PM her on it.

 

[sputnam]

I have a non-lending client, an individual, who has inherited a parcel of land that is Undevelopable and wants to donate it to the town for an IRS deduction on his taxes.
I am a Certified Residential appraiser with 23 years experience but has never had this type of assignment.
Can I perform this appraisal? If so, and if there is no sales activity of similar plots of land in the town or adjacent/nearby towns, what are my options for estimating value for this type of assignment?
Any comments would be appreciated.

Yes, you probably can perform the appraisal. You will need to make sure you conform to the requirements of the IRS. Whether you feel competent to perform the appraisal and whether you choose to are different issues. I would want to be very well paid given that it's going to be used for tax purposes and apparently there are limited comparables.

 

[Zoe]

There are very little differences between FMV definition as required by IRS and MV definition as defined by Fannie Mae.

 

[Zoe]

How much money are we talking about that owner wants to claim as donation? How much land? What would City do with it? What can some other party do with it?

 

[Elliott]

Probably the closest thing to a 'unbuildable' lot is a conservation easement, maybe. Gates and Buffet can set up foundations and minimize their income taxes, but try giving away something without good comparables and the IRS's ears perk up.

FYI: https://www.irs.gov/compliance/crim...han $1.3 billion in fraudulent tax deductions.

I once took on 20-acres of wetland that the owner wanted to donate. I spent 2-months researching land sales and eventually told the owner I couldn't do the assignment because there were no credible comparables.

 

[Zoe]

A very good appraiser I worked with sometimes said the MV definition is "NIL". Be same with FMV definition.

I have no idea on how much land we are talking about.

It does hold the earth together somehow. LOL

He swore you could not have negative MV as defined by Fannie or FMV as defined by IRS.

So his answer was "NIL"

If you change definition of value? Things change.

And also intended use and user.

Your dealing with land only. Land don't depreciate. Land has a H&B use. "HOLD" is sometimes H&B use of land. Look at possibilities on vacant land. Go back to appraisal 101.

FMV and MV definitions require H&B use analysis.

 

[Zoe]

If doing appraisal for MV or FMV, he would say H&B use value opinion was "hold" and/or "NIL".

All that was explained in appraisal reconciliation.

 

[Ricky LaFleur]

From IRS site: https://www.irs.gov/publications/p561#en_US_202312_publink1000115299

Appraiser penalties.

An appraiser who prepares an incorrect appraisal may have to pay a penalty if the appraiser knows, or reasonably should have known, the appraisal would be used in connection with a return or claim for refund, and the appraisal resulted in:

1. A substantial valuation misstatement,
2. A substantial estate or gift valuation understatement, or
3. A gross valuation misstatement.

The penalty imposed on the appraiser is the smaller of:

1. The greater of:
   1. 10% of the underpayment due to the misstatement, or
   2. $1,000; or
2. 125% of the gross income received for the appraisal.

No penalty is imposed if the appraiser can establish that the appraisal’s value is more likely than not correct.

In addition, any appraiser who falsely or fraudulently overstates the value of property described in a qualified appraisal of a Form 8283 that the appraiser has signed may be subject to a civil penalty for aiding and abetting as understatement of tax liability, and may have their appraisal disregarded.

 

[Joe Beaster]

I wouldn't do it simply because of the implications of a potential IRS review. You do not want to take on something you are not qualified to complete, but if you want to learn, perhaps another appraiser could train you on these types of appraisals that are Yellow Book compliant. The IRS can levy fines to both you and the borrower and finding comps can be a real concern. Get help or pass.