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Determining valuation on inherited property

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    Determining valuation on inherited property

    My personal opinion would be an appraisal asap after deceased death but in this case its been 10 months since the deceased death. The PR asked me if she can determine a valuation based on Realtor comps and Zillow plus also obtain an appraisal and use the higher of the 2. Your thoughts.

    #2
    Is this for federal Estate Tax purposes? In other words, is a Form 706 required? If not, I would use any reasonable and fair method. What you describe sounds adequate for estate income tax purposes. If a 706 is required, or there are other reasons that the Executor thinks would surface and cause problems or lawsuits, I would get a professional appraisal.

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      #3
      No form 706 required

      Originally posted by Burke View Post
      Is this for federal Estate Tax purposes? In other words, is a Form 706 required? If not, I would use any reasonable and fair method. What you describe sounds adequate for estate income tax purposes. If a 706 is required, or there are other reasons that the Executor thinks would surface and cause problems or lawsuits, I would get a professional appraisal.
      There is a state/county inheritance tax that needs to be paid which is 1% of gross Estate so the PR wants the valuation to be low for the inheritance tax but also want the cost basis to be high for income tax purposes.

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        #4
        Originally posted by AZ-Tax View Post
        There is a state/county inheritance tax that needs to be paid which is 1% of gross Estate so the PR wants the valuation to be low for the inheritance tax but also want the cost basis to be high for income tax purposes.
        There's probably some wiggle room between a very high valuation and a very low valuation - one which would pass the laugh test. So I'd ask the PR if they prefer to save 1% now and pay at least 15% later, or vice versa? Let them make the decision.
        "The only function of economic forecasting is to make astrology look respectful" - John Kenneth Galbraith

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          #5
          Prop Valuation

          Originally posted by AZ-Tax View Post
          My personal opinion would be an appraisal asap after deceased death but in this case its been 10 months since the deceased death. The PR asked me if she can determine a valuation based on Realtor comps and Zillow plus also obtain an appraisal and use the higher of the 2. Your thoughts.
          Some counties or states perform periodic appraisals for property tax purposes every few years. This could be a starting point which can be adjusted to date of death valuation based on current facts.

          Comment


            #6
            Originally posted by AZ-Tax View Post
            There is a state/county inheritance tax that needs to be paid which is 1% of gross Estate so the PR wants the valuation to be low for the inheritance tax but also want the cost basis to be high for income tax purposes.
            Sorry, PR can't have it both ways. Settle on what is reasonable and reflects as closely as possible actual FMV (at the date of death.) Note recent federal legislation requiring values to be reported which reflect the same on both the Estate tax return and basis at the time of sale. A professional appraisal might be more accurate, but could be lower than realtor comps or Zillow. Once it is determined, you have to use the same for both accountings. State/county would probably accept last tax valuation as FMV, depending on how they determine it (100%?).
            After a year since DOD, property values have probably increased due to the market. So there may be a taxable gain.
            Last edited by Burke; 08-31-2015, 11:59 AM.

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              #7
              I assume the decedent was not an AZ resident since AZ has no inheritance tax, right?

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                #8
                72% of County assessed values.

                Originally posted by Burke View Post
                Sorry, PR can't have it both ways. Settle on what is reasonable and reflects as closely as possible actual FMV (at the date of death.) Note recent federal legislation requiring values to be reported which reflect the same on both the Estate tax return and basis at the time of sale. A professional appraisal might be more accurate, but could be lower than realtor comps or Zillow. Once it is determined, you have to use the same for both accountings. State/county would probably accept last tax valuation as FMV, depending on how they determine it (100%?).
                After a year since DOD, property values have probably increased due to the market. So there may be a taxable gain.
                That is the issue, the valuation is based on 72% of County assessed value. Also, property warranty deeded to heirs and no sale is involved nor will be.

                Comment


                  #9
                  You mean the inheritance tax is based on 72% of county assessed value? Or the county real estate taxes? So the PR only wants to have the FMV for possible future sale? You said she needed it for income tax purposes. In either case, the FMV used needs to be the same for both purposes.

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                    #10
                    Based on assessed value

                    Originally posted by Burke View Post
                    You mean the inheritance tax is based on 72% of county assessed value? Or the county real estate taxes? So the PR only wants to have the FMV for possible future sale? You said she needed it for income tax purposes. In either case, the FMV used needs to be the same for both purposes.
                    Based on assessed value

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