- quote -

Not really because there's no way to prove that the fair
market value of the property hasn't declined below the
donor's cost basis as of the time of death.

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Joe Williams wrote:

- quote -

Andy writes:

If the present state law in your state mandates that the
property is to be appraised at 100% market value, I would
take this as the first shot....

What's the worst that could happen?

Well, the IRS could say that it was 'under appraised' and
you owe more tax..... and...... penalties....

In that case, you have a valid defense, since your local
county appraiser tends to raise the appraised value to as
high a level as he/she possibly can for local income
purposes.......Unless you are talking about a LOT of money,
it ain't worth it..., tho...

Look at your own house appraisal.....

If they are WRR...WR.... WRRRR.. WRONG,,,,,, well, the gov
shouldn't be able to have it both ways......You could probly
have a just action to sue for any penalties due to the IRS
because of the local municipality"s "under-appraisal".....
but it will probly never come to this......... forget about
it...

Give it your best shot using the local appraisal and the
chances that you will have to pay more due to penalties is
miniscule.......

In my opinion, you will only have to pay what you actually
owe, and that's the way life is, if you are very lucky...

On the other hand , if your state doesn't mandate appraisal
at FMV, you are out of luck.....but give it a shot anyway

Andy in Eureka, Texas

(where property is appraised at FMV plus whatever the
appraiser thinks is a reasonable mark-up )

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wrote:

- quote -

No, the property might have been worth less than that at the
time of death.

Seth

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Shyster1040 wrote:
- quote -

Rather than go all the way to zero, couldn't the heir at
least use the deceased's basis as a floor amount in lieu of
knowing the FMV at time of death? That figure might be
easier to determine exactly from documents already in hand.

It's clear that unless you can use an actual cost, and with
inherited property you cannot, then you are supposed to
attach a statement to Sched D to explain how you figured the
basis. I wonder whether a statement such as the following
is likely to pass muster: "According to the Daily Bugle
business section on April 1st, 2006, average annual
residential real estate appreciation in the north end of
town was 11% for the last ten years. Applying 11% annual
increase to sales price and working back in time ten years
to date of inheritance, estimated FMV in 1996 was umpteen
thousand dollars."

-Mark Bole

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Using the county assessors records is unlikely to be
acceptable; the values may not bear any relation to fair
market value (often, assessed value is merely a proxy for
fair market value, and the only requirement is that the
assessed value of every property bear the same ratio to true
fair market value; e.g., if Blackacre is FMV $100 and
Whiteacre is FMV $200, there is generally no issue from a
state property tax perspective if Blackacre is assessed at
$32 and Whiteacre at $64 - in either case, the assessed
value bears the same ratio to FMV, and any property tax
assessed as a percentage of assessed value will thus bear
the same ratio to true FMV).

You will have to either dig up the estate return, or else
have a post-hoc appraisal done based on the selling records
of similarly situated properties.

Unless you do the foregoing, you are very likely to face the
situation where the IRS asserts that you owe tax on the
entire sales proceeds because you cannot prove what your
basis was. The IRS will, generally, be supported in this
matter as the courts generally hold that the taxpayer has
the burden of proving his basis, and the IRS may assert that
basis is $0 in the absence of any proof.

Alternatively, you could ask the IRS for advice on how to
handle the matter; they're not ogres and they very well may
have a rule of thumb or an alternate valuation method you
can use.

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Joe Williams wrote:

- quote -

That's a good place to start, however, many times assessed
values do no equal fair market values. Best to consult with
a local appraiser methinks.

ChEAr$,
Harlan Lunsford, EA n LA

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Ten years ago, I inherited a vacant lot. I sold it this
year and now I have to figure the basis for calculating my
gain or loss. I know that the basis is the full market
value at the time of death, but how do I determine this?
Would it be sufficient to look at the assessed evaluation
that the county used for tax purposes in the year of death
and the preceding year, then use whichever is lowest?

I want to make this simple. The gain or loss is going to be
close to zero, so I don't want to spend a lot of time
digging up the estate tax return (wouldn't know where to
begin looking), or digging up sale prices of similar lots
from ten years ago.

If I can use the county's assessed evaluation, should I use
the earlier one, the later one, the lower one, or a prorated
value in between?

Thanks.

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