Inherited Property Sold and No Appraisal

[peggysioux]

Taxpayer inherited property in 2010 and sold property in 2012. No appraisal was done at date of death. Home is in CA so house went down in value during that time period. Taxpayer recently obtained some comps from realtor but there is a wide swing in value in the comps' and nothing close to the value of the sale. What do other tax preparers do when no appraisal was done. Taxpayer is telling me that that the home was not in an area of track homes so not a lot of homes in area that are similar.

[Matt Sova]

Sev

You could look to the SEV at that time perhaps.

[Bill Tubbs]

What do other tax preparers do when no appraisal was done.

I advise that to make the return more bullet-proof if they would get pulled for an audit that an appraisal or two should be done. However, most clients usually don't go get an appraisal and I use their best number available -- sometimes it's a property tax assessment from that year; other times they are guessing at it.

[mastertaxguy]

It is not for us to say...

The responsibility for determining the basis is on the taxpayer, not the preparer. I never make it MY return when this issue comes up. An appraisal now would not be dispositive, and neither would be the market opinion of real estate agents.

Worst case scenario: taxpayer has to use the sale price as basis with deductions for expenses of sale likely generating a loss for a year or two.

Assessors records may be useful to the taxpayer, as would any fire/casualty insurance policies if the company made some sort of determination of value. If there was a mortgage on the property, a mortgage appraisal may be very useful even if dated.

In 2010, there were some exceptions involving modified step-up basis. See OFTB Pp. 21-34 for an overview. Was community property invovled?

[Dusty2004]

Estate tax

Taxpayer inherited property in 2010 and sold property in 2012. No appraisal was done at date of death. Home is in CA so house went down in value during that time period. Taxpayer recently obtained some comps from realtor but there is a wide swing in value in the comps' and nothing close to the value of the sale. What do other tax preparers do when no appraisal was done. Taxpayer is telling me that that the home was not in an area of track homes so not a lot of homes in area that are similar.

Since they inherited it what was it valued for estate taxes? Would that not be their basis?

Dusty

[Gretel]

You could look to the SEV at that time perhaps.

What is SEV?

[Burke]

Since they inherited it what was it valued for estate taxes? Would that not be their basis?Dusty

Not many people have to file Estate Tax returns any more, since threshold is in the millions. But many have to state the value of assets, including real estate, when they probate the will. Most use most recent tax assessment.