Land can be divided. Attorney says not so fast...

[J Grant]

But the value for estate tax purposes is not predicated on any future hypothetical assumptions, which

HBU today ( or a retrospective DOD ) , if for development/subdivisions is not predicated on any future hypothetical assumptions, but rather predicated on that if typically motivated buyer is a developer/investor/speculator, that buyer sees the potential for subdivision development TODAY, or they saw that potential on a retrospective date. A buyer purchases a property with future benefits in mind, and pays today's (or retro eff date ) price to get those future benefits.

Imo the value is not for "estate tax purposes", the purpose is market value opinion with a use to determine estate taxes

 

[CANative]

I respectfully disagree, because what got lost in the entire thread was the appraiser forgot that the client was the Estate and the intended user will also be the Internal Revenue Service. In this situation, the accountant will file the estates final tax return to close it out. So when the appraiser receives the assignment the client will normally communicate what the appraisal will be used for. The appraiser had to begin taking the steps to determine if the scope of work will provide the Client and the ( IRS ) with credible results. The highest and best use analysis was never an-issue with me because those conclusions are reported in all appraisals. But the value for estate tax purposes is not predicated on any future hypothetical assumptions, which may never even happen. ** Please See IRS Qualified Appraisal Release Below : June-2019.

A Qualified appraisal refers to a type of appraisal document that meets Internal Revenue Service (IRS) appraisal standards. These appraisals must be conducted by a qualified appraiser ... This designation is awarded on the basis of demonstrated competence in valuing the type of property for which the appraisal is performed. Jun 25, 2019

Note: This appears to deal mainly with donations, but some of the accountants and estate attorneys are already starting to use only Appraisal Institute members, what's confusing is nobody seems to know which organizations qualify, other than the AI & ASA .

In Summary: I realize I was to harsh with the original poster because she simply came on board to get assistance but the thread went from H & B to prospective "V" Retrospective, and finally I came to the opinion that, if I could help prevent-the forumite from stepping on a land mine, then I would rather have her hate me then end up dealing with some potentially litigious attorney. The bottom line is I am confident the appraiser will make the right decision.

Respectfully disagree with the red highlighted text. I don't make the IRS an intended user, and a HBU conclusion that the most likely buyer, on the retrospective date of value, is a developer buying for redevelopment is not a hypothetical.

From a day or two ago:

Scope of Work, Intended Use, Intended User Statement:

The purpose of this appraisal is to develop and report an opinion of Retrospective Fair Market Value for the subject property as of Xxxx 1, 2019. The intended use of this appraisal is for asset management and taxes ("Date of Death Valuation") in the matter regarding the Estate of Ms. Xxxx Xxxx Xxxxxxx. More specifically, the valuation requirement in the filing of a protective Form 706 (IRS Form 706, United States Estate (and Generation-Skipping Transfer) Tax Return) by the Executor of the Estate.

The Client and Intended User is identified as zzz zzz, Executor. Also identified as an intended user is zzz x. xxxxxx, EA xxxx@xxxxx.com.) Per the letter of engagement, xxxx, EA is to receive a digital copy of this Appraisal Report.

This Appraisal Report IS NOT intended for mortgage lending uses. No other intended uses or users have been communicated to the appraiser.

etc., etc.

 

[glenn walker]

But the value for estate tax purposes is not predicated on any future hypothetical assumptions, which

HBU today ( or a retrospective DOD ) , if for development/subdivisions is not predicated on any future hypothetical assumptions, but rather predicated on that if typically motivated buyer is a developer/investor/speculator, that buyer sees the potential for subdivision development TODAY, or they saw that potential on a retrospective date. A buyer purchases a property with future benefits in mind, and pays today's (or retro eff date ) price to get those future benefits.

Imo the value is not for "estate tax purposes", the purpose is market value opinion with a use to determine estate taxes
[/QUOTE
No the person is deceased, and yes the opinion of market value as of date off death will be used to determine the stepped up costs basis, and depending on the size of the estate there will no taxes owed unless the estate is very large $11,400,000 in 2019. and those estates typically have an-army of professionals, attorneys, Certified Public accounts and , if they need a feasibility study they have those guys to.

 

[glenn walker]

But the value for estate tax purposes is not predicated on any future hypothetical assumptions, which

HBU today ( or a retrospective DOD ) , if for development/subdivisions is not predicated on any future hypothetical assumptions, but rather predicated on that if typically motivated buyer is a developer/investor/speculator, that buyer sees the potential for subdivision development TODAY, or they saw that potential on a retrospective date. A buyer purchases a property with future benefits in mind, and pays today's (or retro eff date ) price to get those future benefits.

Imo the value is not for "estate tax purposes", the purpose is market value opinion with a use to determine estate taxes

Think about what you saying !! Development in California for almost anything , especially subdivisions is always a hypothetical assumption, because until the developer has obtained, all finalized approvals and paid for all the the entitlements, the average subdivision in California, normally takes a minimum of 12 months or more even before the developer is even fairly sure that he wants or can proceed. And from start to finish the typical project is 2 to 3 years out before construction even starts. I am sure in other States it's not like this but our Cities and Counties are not pro development , We are too busy trying to take care of the thousands living in tent cities or sleeping on the sidewalks and of course we are a sanctuary State that welcomes anyone from anywhere. Even our Earthquake today makes development a hypothetical, will a new fault line be discovered under some poor guys parcel of land ? that some appraiser said was worth $5,000,000 last month ? And now that site could be a future site for tent cities because tents do better in earthquakes than real estate with concrete foundations : )

P.S. Those Hybrids are looking better and better, at least the appraiser never physically inspected that bad-boy and maybe his-her liability is actually less than what we have been taught to believe. ?

 

[J Grant]

Perhaps - though I have done some estate work.

The HBU problem OP posted about is a separate appraisal problem than the fact that an estate ordered the appraisal.

Imo you seem to be mixing use and purpose of appraisal as one and the same. The Purpose of the appraisal is opinion of market value , and the USE (by IRS ) is to determine taxes. We have nothing to do with their tax decision, correct? We just provide our opinion of market value on the property, and they can use it ( or reject it ) to establish amount of taxes owed on the property. I don't get involved in their laws around estates or what amounts get taxed and what is exempt etc.

 

[glenn walker]

Perhaps - though I have done some estate work.

The HBU problem OP posted about is a separate appraisal problem than the fact that an estate ordered the appraisal.

Imo you seem to be mixing use and purpose of appraisal as one and the same. The Purpose of the appraisal is opinion of market value , and the USE (by IRS ) is to determine taxes. We have nothing to do with their tax decision, correct? We just provide our opinion of market value on the property, and they can use it ( or reject it ) to establish amount of taxes owed on the property. I don't get involved in their laws around estates or what amounts get taxed and what is exempt etc.

The

Respectfully disagree with the red highlighted text. I don't make the IRS an intended user, and a HBU conclusion that the most likely buyer, on the retrospective date of value, is a developer buying for redevelopment is not a hypothetical.

From a day or two ago:

Scope of Work, Intended Use, Intended User Statement:

The purpose of this appraisal is to develop and report an opinion of Retrospective Fair Market Value for the subject property as of Xxxx 1, 2019. The intended use of this appraisal is for asset management and taxes ("Date of Death Valuation") in the matter regarding the Estate of Ms. Xxxx Xxxx Xxxxxxx. More specifically, the valuation requirement in the filing of a protective Form 706 (IRS Form 706, United States Estate (and Generation-Skipping Transfer) Tax Return) by the Executor of the Estate.

The Client and Intended User is identified as zzz zzz, Executor. Also identified as an intended user is zzz x. xxxxxx, EA xxxx@xxxxx.com.) Per the letter of engagement, xxxx, EA is to receive a digital copy of this Appraisal Report.

This Appraisal Report IS NOT intended for mortgage lending uses. No other intended uses or users have been communicated to the appraiser.

etc., etc.

I agree I do not make the IRS an-intended user either, but I always ask what other professionals will be involved, most of mine are ordered by the estates accountant, and since the estates attorney is also working on the estate, he/she will almost always receive a copy too, so if it was ordered and developed for a DOD then the appraiser is fully cognizant of what the appraisal is going to be used for. Anyway below is IRS Section 20.1.12 which authorizes the IRS to penalize and seek injunctions, against appraisers. This is a very long and complex section but I was told by one CPA that if the IRS suspects an-extremely over-inflated appraisal on any asset class, personal or real property, they can also file a complaint with the appraisers State Board. So my position is I normally name the estate as the client, unless all the original executors are dead and in rare cases the banks trust department is named as one of the intended users. No big deal I am looking at being a "hybrid" Specialists

The Service has authority to penalize and to seek injunctions against appraisers. Prior to the passage of the Pension Protection Act of 2006 (Pub. L. No. 109-280), appraisers could only be subject to penalties under IRC 6700, Promoting abusive tax shelters, etc., or IRC 6701, Penalties for aiding and abetting understatement of tax liability.

 

[CANative]

I am sure in other States it's not like this but our Cities and Counties are not pro development , We are too busy trying to take care of the thousands living in tent cities or sleeping on the sidewalks and of course we are a sanctuary State that welcomes anyone from anywhere.

Ya know... I'm getting sick of you posting horseshirt like this. WTF is wrong with you? Totally inappropriate for this topic.

The IRS "qualified appraiser" is to prevent tax payers and/or their EA's from using the gardener, the postman, the real estate agent or the cat from doing the appraisal. Just do a competent appraisal report and stay in your lane.

 

[glenn walker]

Ya know... I'm getting sick of you posting horseshirt like this. WTF is wrong with you? Totally inappropriate for this topic.

The IRS "qualified appraiser" is to prevent tax payers and/or their EA's from using the gardener, the postman, the real estate agent or the cat from doing the appraisal. Just do a competent appraisal report and stay in your lane.

I understand that and maybe the chatter from Appraisal Institute , and larger organizations, was a scare tactic , because I always understood that as long as you were licensed or certified that made you a qualified appraiser, now with that said, that does' not negate the fact that the IRS does' have authority to deal with rouge appraisers, who have been caught over-inflating real estate values, most were done for wealthy people donating high dollar real estate and writing off as tax deductible donations, but some were also cookie cutter houses. So anyway I get your point but will try to talk with one of the CPA's next week, I do no we lost one CPA firm a few months ago and they said they are now only using SRA's and MAI's on their estates.

 

[J Grant]

I understand that and maybe the chatter from Appraisal Institute , and larger organizations, was a scare tactic , because I always understood that as long as you were licensed or certified that made you a qualified appraiser, now with that said, that does' not negate the fact that the IRS does' have authority to deal with rouge appraisers, who have been caught over-inflating real estate values, most were done for wealthy people donating high dollar real estate and writing off as tax deductible donations, but some were also cookie cutter houses. So anyway I get your point but will try to talk with one of the CPA's next week, I do no we lost one CPA firm a few months ago and they said they are now only using SRA's and MAI's on their estates.

What is is wrong with "some" appraisers...That's kind of the IRS to call them rogue- I'll over appraise your gift donation to get you a big tax write off, and I'll under appraise your estate sale so you can pay less taxes wink wink. ...

If appraisal purpose is market value, then appraise a property for it's market value. The use of an appraisal is the client's use, not the appraisal purpose. If it is a market value purpose appraisal, than appraise the property for it's effective date (whether past, present or future) market value, not per a scheme or influence from client . Make that decision and your life becomes simple. Not easy, but simple..

.

 

[Terrel L. Shields]

Again most estate appraisals DO NOT make the IRS an intended user. They (the IRS) only require that they be named in the event of a GIFTING. There is an explicit example in USPAP about this.