Estate, Tax, and Date of Death (DOD) Real Property Appraisal Services

 

Estate Settlement Including Income Tax

If you have lost a loved one, we send our deepest condolences.

Colorado Appraisal Consultants provides estate appraisals compliant to IRS Publication 561, Notice 2006-96, related to Publication 950 that can be used for Form 706, Form 709Form 8283 and other related gift/estate tax forms. 

We have experience providing attorneys, trusts, estates, private entities, LLC’s, and private individuals with commercial and residential real property (real estate) appraisal services for estate settlement (income tax) purposes.

What is Date of Death (DOD) Appraisal?

A Date of Death (DOD) appraisal refers to an appraisal that is made Retrospective to the date of passing, based on the Fair Market Value (FMV) of the property, to be used for income tax purposes. A DOD appraisal can be needed when a property owner or member of an entity that owns property dies.

Why a DOD (Estate Settlement) Appraisal?

After the passing, the property or some portion of the property interest is typically gifted or transferred to a new person or entity. Due to the fact that the entity acquiring the property is not purchasing it, often times, a “basis” must be established in which to measure future capital gains or losses, or, estate taxes. Refer to the table below for 2010-2013 federal estate tax exemptions.

Thus, a DOD appraisal or appraisal made for estate settlement is used by the Client, Estate, or member of the Estate (personal representative, executor, heir, etc.), and the IRS, for matters related to taxation. Often times, your attorney, CPA or other professional assisting with your estate settlement will review the appraisal and utilize the established FMV for various calculations, such as taxes due.

Depending on the situation, the appraisal may be needed to establish the new basis, which can be either “stepped-up” or “stepped-down”. The effective date of value (date in which the value is tied to) is the date of passing, also referred to as the date of death.

When to Get a DOD (Estate Settlement) Appraisal

An estate settlement appraisal is commonly needed for the real estate assets in the estate if the gross value of the estate exceeds the Federal Estate Tax Exemption. This is summarized as:

2010-2013 Federal Estate Tax Exemptions Summary Grid

2010-2013 Federal Estate Tax Exemptions Summary Grid


For example, if a property owner passed in 2011, and the gross estate value was over $5 million, you would most likely need an appraisal on the real estate within the estate. However, please note that the tax code is complicated and full of various exemptions and requirements. Thus, always consult with a tax professional and attorney before ordering an appraisal related to estate settlement. 

Do you need an Appraisal if the Estate is less than the Federal Estate Tax Exemption?

There is no clear-cut, yes or no answer to this question that will apply to every situation. Here are some general guidelines:

  • It can be much more costly to order a real estate appraisal several years after the effective date of value (date of passing). As a result, some people prefer to get an appraisal on the property as soon as possible as one way of mitigating potential risks/costs.
  • There can be disputes within the family, or heirs, related to value and/or “who gets what”. Disputes can surface immediately after the passing, or, several years later. Getting an appraisal on the property as soon as possible is one way to prepare for a dispute.
  • There can be disputes made by the IRS claiming your property was worth more than you thought, potentially triggering taxes. Having an appraisal that documents and supports the fair market value of a property as of the date of passing can substantiate the value of the property, and the resulting taxes.
  • Sometimes, it may become impossible to get an accurate and well-supported appraisal on a property several years after the date of passing, especially if the property is substantially altered. If the property is eventually sold and there a capital gains, there may be disputes between the owner (seller) and the IRS. The owner may have a very difficult time defending their position if they do not have an appraisal.
  • Or, none of this could ever happen and you may never need an appraisal on the property.
Always consult with a tax professional and attorney before ordering an appraisal related to estate settlement.

Fair Market Value & Highest & Best Use

Without using the technical definition of Fair Market Value (FMV), the term refers to the price in which the property would change hands for, assuming neither the buyer nor seller are forced into a buy/sell position, and each party is privy to “the facts”. Under this meaning, the property would trade for a value based on its Highest and Best Use, which includes the most maximally productive use, as of the date of passing. That is, if the buyer and seller are aware of the facts, than it is assumed that the maximally productive use of the property would dictate the sale price. In some cases, the highest and best use of the property can be as it physically and legally existed at the time of passing. This would be in a situation where the property was improved and used to the maximally productive use. In other situations where the property’s highest and best use was not being realized, it is assumed that a buyer and seller would recognize this fact and would base a sale price on the use that was most maximally productive as of the effective date of value. Developing the highest and best use in an estate settlement appraisal can be substantially more  time-consuming than a appraisal used for lending purposes.

DOD (Estate Settlement) Appraisal Price & Time to Complete

To quickly and easily get pricing and turn around time for an appraisal needed for estate settlement (DOD) please use our pricing form. Please be sure to include the date of passing in the comments section so we can understand how far back in time the assignment will be.

Additional Questions?

We are available to answer any questions you may have about the appraisal process. Contact Colorado Appraisal Consultants Here and submit your question, or pick up the phone and dial 720-315-2530.

Disclaimer

Tax laws are ever-changing and Colorado Appraisal Consultants makes no warranty, express or implied, as to the accuracy, completeness, or timelyness of this information. This page may be inaccurate and/or incomplete.  It is not to be relied on as advice, consultation, or any legal opinion whatsoever. Always consult with a tax professional and attorney regarding your situation. It is possible that none of the information on this page will apply to your situation.

The most probable price that a specified interest in real property is likely to bring under all of the following conditions:1. Consummation of a sale will occur within a severely limited future marketing period specified by the client.
 
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