Discussion:Life Estate - Inherited land at death - Professional appraisal of land 3 months after death
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Discussion Forum Index --> Advanced Tax Questions --> Life Estate - Inherited land at death - Professional appraisal of land 3 months after death
Discussion Forum Index --> Tax Questions --> Life Estate - Inherited land at death - Professional appraisal of land 3 months after death
| 8 February 2009 | |
| 40 acres of land was deeded to the son in 1997 with father retaining a life estate. Father died in Sept, 2004. An appraisal was completed in early January, 2005. The 40 acres of land from the life estate,in addition to 8.75 acres of land still held in the father's name until his death for a total of 48.75 acres, was valued at $600,000 by the appraisal. Sometime before the sale in early 2008, a request for subdivision was made before the County Commission. The request was denied, which squashed the selling price from approximately $14,000 per acre to $8,891 per acre. Since the County Commission's action could not have been known or anticipated at the time of the appraisal, I believe that that the cost basis should remain at $12,307 per acre ($600,000 / 48.75 acres). Am I correct or is there something I am not thinking about? I really need your help. Thanks very much for looking at this. | |
| 8 February 2009 | |
| Agreed. It is unlikely that anyone could have anticipated this chain of events in 2004 | |
| 8 February 2009 | |
| If the appraisal was based on subdivided value I would disagree. | |
| 8 February 2009 | |
| Assuming that there was no zoning application pending at the time of death, the denial of a zoning application submitted 3½ years after death would ostensibly have no bearing on the date of death valuation. | |
| 8 February 2009 | |
| Agree with Riley. The appraisal in 2005 established DOD value & basis. | |
| 8 February 2009 | |
| Nonsense. Appraisals establish nothing but a position. To say that an appraisal governs without having the slightest idea about the methodology used is ... (pick your choice of invective). I would be more kind if the appraisal in question produced a taxable estate, but somehow I doubt it.
To elaborate on my position for Riley's benefit, it is quite possible an appraisal was based on value that could be realized from eventual subdivision. The operative condition would have been not whether an application was pending, but whether one was required and if so the historical likelihood of success at the time. I agree with the position that unanticipated consequences will not affect basis. I disagree with a position that validates the original appraisal without knowing what it says. | |
| 9 February 2009 | |
| No argument there. I live in Southern California, and if we use the highest and best use of an orange grove, we would almost always be using the residential or commercial value, and not the agricultural value -- even though certain localities will place a limit on the number of new subdivisions in a given year.
Thus, let me restate my postion. Absent any evidence that the original appraisal was defective, I see no real significance to the fact that an application for subdivision was submitted and rejected 4 years after death. | |
| 9 February 2009 | |
| Not enough informatin here: You don't mention the parameters the appraiser was given when the appraisal was made. If it was appraised as subdivision land and it is certain that subdividing would have been approved in 2005, the appraisal should stand. If the appraisal had weasel words like "if a subdivision is approved" a lower value would be appropriate. | |
| 10 February 2009 | |
| The purpose of the appraisal was to estimate the market value of the fee simple interests in the subject property. The definition of market value under which the subject property was appraised is from federal regulations and is as follows: "The most probable price which the property should bring in a competitive and open market under all conditions requisite to fair sale, the buyer and seller, each acting prudently, knowledgeably, and assuming the price is not affected by undue stimulus. Implicit in this definition is the consummation of a sale as of a specified date and the passing of title from seller to buyer under conditions whereby buyer and seller are typically motivated; Both parties are well informed or well advised, and each acting in what he considers his own best interest; A reasonable time is allowed for exposure in the open market; Payment is made in cash in U. S. dollars or in terms of financial arrangements comparable thereto; and The price represents the normal consideration for the property sold, unaffected by special or creative financing or sales concessions granted by anyone associated with the sale." I didn't find anything referencing anything whereby the appraisal would consider subdivision of any kind. The only other thing I saw was that the writers of the appraisal included timber in their developement of value, but that no separation between land and timber had been given. They only said that if timber value were to be extracted from the property, that the value may need to be changed accordingly. This never happened. Therefore, I don't think there is any other information I can add other than what is noted above. Thanks for all of your comments. Talk about a think-tank, you guys are the real deal. | |
| 10 February 2009 | |
| The Tax Court has been known to compute fair market value with an assumption of re-zoning when there is only a mere possibility of re-zoning. | |
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