Inherited property

[Edward]

Client inherited 77 acre farm property in 2007 when Uncle passed away. The same year (2007) he obtained an official appraisal of the property of 277,700. He sold the property 6/7/2012 for 240,000. The property has been totally vacant since the death of his Uncle. After deducting closing costs and the $600 cost of the appraisal, he now has a new baiss of 291,182. which will result in a LT Capital Gain Loss of 51,182. Due to real property values downward trend in recent years, would he need a new adjusted appraisal figure from the appraiser, or will this clear IRS as shown above? Will appreciate any comments.

[Gretel]

I don't foresee any problems claiming the loss. Land was held as investment property and not personally used, right? Good that he had an appraisal done.

[FEDUKE404]

Appraisal issue

You might want to check the fine print about having the 2007 appraisal considered as part of the inherited cost basis. From your post, it appears the appraisal was independent of the inheritance/sale of the property.

Was there not already a value of the property stated on the paperwork at time of death, estate papers, etc?

[Edward]

Appraisal of Inherited Property

Yes, the appraisal was independent of the inheritance/sale of the property - so you're saying that I should not include this as part of the inherited cost basis. I guess that makes sense, but it was a cost that was necessary to officially determine the value of the land so it would avoid an issue with IRS. Anyway, i'll just leave it off as it won't affect the transaction that much. Thanks...

[oceanlovin'ea]

include appraisal

I think I would include the cost of the appraisal in my cost. Why wouldn't you? You need to have one done to establish value of property at the time of the death of the previous owner.

I don't see a problem.

Linda, EA

[Lion]

I think the concern of the responders is that this is an independent appraisal and may not be the DOD cost basis for him to use (not the price he paid to have an independent appraisal done after he owned the property). The appraisal done for the DOD value by the estate that established the value on the estate tax returns is important. OP needs to get that value from the executor or copies of the estate returns. If OP disagrees with that appraisal, he will need to document well.

[Burke]

Due to real property values downward trend in recent years, would he need a new adjusted appraisal figure from the appraiser, or will this clear IRS as shown above? Will appreciate any comments.

Adjusted for what? He got one in the year of death, I see no reason to get a new one at all. The IRS is dealing with many, many situations of this ilk. It is not unusual.