1041 estate return

[JenMO]

Client died and 1 year later real estate was sold. Price received was $9000 less that the inventoried amount at date of death. Usually, if sale is close to death, I assume FMV at death is the same amount received as at date of sale If inventoried more, I just figure they were wrong in the inventory. But a year later, the real estate set empty for a year -- Is a year a reasonable time that FMV could have changed from date of death to date of sale? Sometimes what you think you want to get for an asset and what someone wants to pay for it can be very different.

[appelman]

9K is almost within the noise level.

But if it was a genuine and documented appraisal by a qualified and credentialed appraiser, I would claim the loss.

Client died and 1 year later real estate was sold. Price received was $9000 less that the inventoried amount at date of death. Usually, if sale is close to death, I assume FMV at death is the same amount received as at date of sale If inventoried more, I just figure they were wrong in the inventory. But a year later, the real estate set empty for a year -- Is a year a reasonable time that FMV could have changed from date of death to date of sale? Sometimes what you think you want to get for an asset and what someone wants to pay for it can be very different.

[Roberts]

How did you determine the inventoried dollar amount at date of death and were there estate taxes paid?

[JenMO]

No estate taxes paid(not large enough). I'm not sure how it was appraised. Don't think it was by a qualified appraiser(no cost for appraisal in settlement), it was on the final settlement given to the judge to be signed.

[Rickbrowngsts]

Sale of Property at a loss

Client died and 1 year later real estate was sold. Price received was $9000 less that the inventoried amount at date of death. Usually, if sale is close to death, I assume FMV at death is the same amount received as at date of sale If inventoried more, I just figure they were wrong in the inventory. But a year later, the real estate set empty for a year -- Is a year a reasonable time that FMV could have changed from date of death to date of sale? Sometimes what you think you want to get for an asset and what someone wants to pay for it can be very different.

Seems to me that we need more information here. I am assuming that there was no paid appraisal to verify value, so you are depending on the probate court appraisal, which may, or may not, be acceptable to the IRS, but probably is.

First question - Where are you located, and what is happening to the real estate market in your neck of the woods? I am in the Sacramento, CA area, and here real estate has seen some substantial appreciation during the last year. In a slow market, with a sale within six months or so, I will often use actual selling price as a better indicator of value than even a paid appraisal, which after all, is just a guess, even if it is by a professional. However, if the house was in my market, I would expect appreciation of somewhere between 10 and 20% in the past year. So I would be highly skeptical of a 9,000 loss. But I understand that real estate prices in some areas of the country have been much more stable.

2nd Question - What, if anything has happened in the past year that can affect the value? I'm also assuming that the house has been vacant. Has it been cared for, and the yard kept up? Has there been storm damage, vandalism, etc, which often happen to unoccupied houses? If you plan to claim a loss, and real estate values in your section of the country have been stable, or appreciating, then I think you need a logical explanation of why this property has depreciated, and why the initial value should be accepted.

Final Question - in your computation have you factored in sales expenses? Typically, even if a sale happens very soon after death, and you use the sales price as dod value, commissions and other sales expenses will generate a loss all by themselves. Is that a part of your 9K loss?

[JenMO]

We're in the Midwest, small town. House was vacant, but yard mowed, utilities paid. Not sure what the neighborhood was, but what houses should be worth here aren't always what they are sold for. Sometimes a lesser sales price is accepted to get rid of the estate property. People know this and will offer lower bid.

[Burke]

A small ($9K) loss will not be questioned in all likelihood, because as you mention, estates often sell at a loss to get rid of property. In the last few years, I have seen much bigger losses (in excess of $75K+) and none of them were questioned either. Most of the time, estate inventories use the real estate tax basis as its value for probate purposes. The actual FMV can be either more or less. The inventory does not definitively establish the basis for income tax purposes like it might on a 706.