loss on inherited house

[kathyc2]

Question for all you estate gurus. Appears contract for sale of house inherited is less than FMV. DOD was in July and property never used for anything other than personal use of decedent.

Have in hand:
CMA (realize this is subjective)
Prior written offer that fell apart

Would the combination of above plus an appraisal from an appraisal company be considered enough to claim a loss?

[DaveinTexas]

Hard to say in this crazy market! Last July, in my neck of the woods, there were bidding wars and it wasn’t uncommon to have a client receive 12 offers on their house in a week. Currently, the market has cooled and it is turning into a buyer’s market as prices have sustained or dropped.

Look at at the time frame, that will play a factor, but also look to the real estate environment in that specific area. Also, it might not be a bad idea to suggest the client obtain a retro active appraisal. The cost is about double the cost of a regular appraisal, but worth it to secure the loss in my opinion. I wish the decedents would just get an appraisal around TOD, that would make everyone’s lives easier. I have a client that just sold her house with her deceased husband’s name still on title (passed away 4 years ago; no probate!).

[ATSMAN]

Agree with Dave. I was at a seminar few years back and the speaker suggested a written appraisal if you are going to be claiming a loss because if IRS audits your CMA and other methods may not stand the scrutiny and a deficiency will be assessed. If there is net capital gain the chances of audit are less.
>> I have a client that just sold her house with her deceased husband’s name still on title (passed away 4 years ago; no probate!).

I guess it depends on state rules. I have seen that in MA as well. People still keep the dead owner on the title. The deed is signed over by the personal rep. at the time of transfer, at which time it is reconciled at the Registry of Deeds.

[New York Enrolled Agent]

Question for all you estate gurus. Appears contract for sale of house inherited is less than FMV. DOD was in July and property never used for anything other than personal use of decedent.

?

Kathy - I'm having a hard time wrapping myself around selling for less than FMV. FMV is what a willing buyer will pay a willing seller.

Are you suggesting the price dropped from July to October? Take a possible loss for the selling expenses and move on. Your question suggests you are having concerns.

[kathyc2]

Kathy - I'm having a hard time wrapping myself around selling for less than FMV. FMV is what a willing buyer will pay a willing seller.

Are you suggesting the price dropped from July to October? Take a possible loss for the selling expenses and move on. Your question suggests you are having concerns.

Just looking for others opinions from what others would use to document FMV at DOD. IMO FMV dropped from DOD for a couple of reasons: natural downturn of housing market in fall and considered "stale" property by buyers because of being on market over 2 months. You disagree this could happen?

[DaveO]

We have an inheritance tax here so I usually rely on that number which is often backed by an appraisal. Absent the appraisal I usually go with the tax assessment. Transaction cost often create a small loss.

[Kram BergGold]

I would tell client give me a written appraisal based on D of D value or we just claim a loss for the settlement costs. Two months is not a lot of time for the value to go down.

[Burke]

Have in hand:
CMA (realize this is subjective)
Prior written offer that fell apart

Would the combination of above plus an appraisal from an appraisal company be considered enough to claim a loss?

IMO, yes it would..

[DMICPA]

I believe an appraisal is needed to verify DOD value. This is especially important if a large loss has occurred. If the house was sold shortly after the death, the sales price could be an accurate reflection of the DOD value.

[Snaggletooth]

Real world answer:

If house was sold within a few months of the decedent's death, it would be difficult for an auditor to claim FMV was an inappropriate basis. Even if repairs had to be made, they would become part of the basis as well.

An auditor would need to have special information, which would be a remote possibility, and cause him[her] extra time and trouble that usually makes it not worth their time and effort.