Basis on inherited rental house

[oceanlovin'ea]

New client.. Wife inherited a rental house from her father when he died in 2011. It was in probate and first rental check she received was Jan of 2012. I am trying to establish basis for depreciation.

I looked at the property records for the county, which gives me land value and total value. Then I went to Zillow.com which gives estimates of what property is valued at as far as resale value. The Zillow price is about $10,000 higher than the assessed value on property records.

Now we all know that you can't necessarily use the assessed value as your basis. So do I go somewhere inbetween? Use assessed value? Use zillow value?

Thanks.

Linda, EA

[taxmom34]

I would not use the assessed value, as you know, cities don't evaluate every year and it takes them a couple years to catch up to the actual value of a home. I would use the higher value from Zillow.

[New York Enrolled Agent]

New client.. Wife inherited a rental house from her father when he died in 2011. It was in probate and first rental check she received was Jan of 2012. I am trying to establish basis for depreciation.

Why would the basis not be the FMV on the day of death?

[oceanlovin'ea]

don't know it

I don't know what the fair market value was on the day he died. I looked at the assessed value as of 2011 so I think that is close to the date of death.

Zillow can be a little high too. I am inclined to go in the middle and just explain that I think one is high and one is low so we will use an average of the two.

Linda, EA

[Lion]

Use FMV on DOD. It should be on the inventory that went to Probate. If not, have client get a formal appraisal as of the DOD, or at least a written report from a local realtor. The more money that's involved, the more it will pay him to have a licensed appraiser.

[Edward]

As Lion mentioned, I would recommend a formal appraisal and that would most certainly satisfy IRS if the subject ever comes up. The "inventory appraisal" probably would be estimated by an Attorney which in most instances is excessive and could cause problems later on.

[ChEAr$]

As Lion mentioned, I would recommend a formal appraisal and that would most certainly satisfy IRS if the subject ever comes up. The "inventory appraisal" probably would be estimated by an Attorney which in most instances is excessive and could cause problems later on.

Just be sure that the appraiser hired knows to backtrack and come up with a figure as of DOD.
And yes, it can be done.

Also, NEVER trust zillow.com

[Gary2]

The more money that's involved, the more it will pay him to have a licensed appraiser.

This is the key point.

Appraisals are always estimates. An experienced, licensed real estate agent who's been asked for a fair value (not a value for pricing it for sale, and not a value they'd give to get the job of selling it, but a fair value for what it would likely sell for) is going to be in the same ball park as a professional real estate appraiser. That's ok if it's a small ball park, but if it's a large ball park, getting the professional appraisal is cheap insurance.