Appraisers' Free Forum

**Jim Plante** · Posted: Sun Aug 12, 2007 8:28 pm Post subject: Estate stuff

So you got an order for an estate appraisal. The client is one of three brothers who inherited their father's 500-acre farm; he's the executor. The intended use is to assist in filing the estate tax return, he says. He's got a CPA who'll be using the report, and his attorney will also need to use it to assist in the equitable division of assets among the heirs.

Here are just a few things to watch out for. Other members may add to this list.

1) The client is the Estate of Guy Deadman, YourClient, Executor.

2) The intended users of this report are: Number Cruncher, CPA; Sue M. Good, Attorney at Law; and the heirs of the Estate of Guy Deadman. The client's CPA has stated that this report will be filed with the IRS to support the value claimed for the estate on the estate tax return. The client did not name any other intended users at the time this assignment was engaged.

3) The report is intended to be used by Number Cruncher, CPA, to assist in the determination and calculation of estate taxes. It will be used by the U.S. Internal Revenue Service to assist in the determination, calculation, assessment, and collection of any estate taxes due. It will be used by Sue M. Good, Attorney at Law, to assist in equitable division of estate assets according to the will of the deceased. It will be used by the heirs of the Estate of Guy Deadman to assist in the equitable division of estate assets. This report is not intended for any other use, and specifically may not be used in any way in connection with a mortgage loan transaction. Further, it should not be used to assist in setting an offering or selling price for the real property assets of the estate.

4) The purpose of this report is to estimate the "fair market value" of the fee simple interest in the real property assets of the Estate of Guy Deadman, effective on May 12, 2007, the date of death of the decedent. Although the subject estate contains other chattel assets, they are not considered in this report.

5) "Fair Market Value" is defined by the U.S. Internal Revenue Service at ....
(If anybody has that definition and its source handy, please post it. I can't find mine right now.)

6) I observed the real property and the improvements thereto for condition and quality on July 1, 2007. This appraisal was developed under the extraordinary assumption that the condition of the improvements to the real property belonging to the subject estate were in substantially the same condition on the date of observation as they were on the date of Guy Deadman's death.

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That's enough for now. I'm composing this on the fly, and I'm getting tired of writing. Anybody see something I missed?
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Jim Plante

WM · Posted: Mon Aug 13, 2007 6:04 am Post subject:

Should be a no-brainer, but I'll add it anyway:

Write it on a GP form or as a narrative only. No fannie forms.

**Festus** · Posted: Mon Aug 13, 2007 8:47 am Post subject: Re: Estate stuff

**Jim Plante** · Posted: Mon Aug 13, 2007 9:04 am Post subject:

But it limits my liability, though, and that's what it's for.

I wouldn't take the bet, but we can sure do the Kenner Seafood thing.

BTW, this isn't a real appraisal. Just an example to show others what kind of mess they can get into with these things. Wish I could find my IRS definition of FMV, though.
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Jim Plante

**Festus** · Posted: Mon Aug 13, 2007 10:08 am Post subject:

Mine is either in (or on) a file cabinet/storage box/bookshelf/birdcage located in my office/
hallway/attic/storage building/off-site storage. See if this link will get you close:

http://www.irs.gov/publications/p561/ar02.html#d0e139
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Taste

Tone

Tenacity

**Joker** · Posted: Mon Aug 13, 2007 11:46 am Post subject:

In item #6-
Verify from the client that the effective date of the appraisal is to be the date of death or another date. Sometimes, they can be different dates.

JMichael · Posted: Mon Aug 13, 2007 5:42 pm Post subject:

Jim .. would you also list the IRS as a potential user of the report knowing it was being done for estate tax purposes? I have always included them as a potential identified user .. I was just curious what your thoughts were.
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Sink your Teeth into the A$$ of Life!!

JMichael · Posted: Mon Aug 13, 2007 5:43 pm Post subject:

The only other date it can be Joker is the Alternate Date of Valuation .. EXACTLY six months to the day after the date of death. There are some reasons for doing this but it is usually decided by the estate attorney or accountant for financial reasons. These are the two dates you need to know when appraising estates.
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Sink your Teeth into the A$$ of Life!!

**Jim Plante** · Posted: Mon Aug 13, 2007 5:51 pm Post subject:

JMichael,
I sure wasn't aware of *that* little gotcha. I had been told that anything within six months was acceptable. But the "six months to the day" sounds more like IRS. So far, all of mine have called for "date of death."

I list everybody the client identifies as an intended user, and I help him try to find more. Often the SOW gets modified after a conference with the attorney or CPA, because that's when you find someone else in the picture--a distant cousin, a long-ago gift of part of the land to a church or charity--all kinds of wonderful stuff can crop up on these things.
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Jim Plante

JMichael · Posted: Mon Aug 13, 2007 6:28 pm Post subject:

Mr Plante

I have only done alternate date .. twice ... once right after 9/11 when the value of the decedents stock had dropped significantly and they wanted the alternate date to lessen the value of the estate. I think the reason is it allows the estate to have a means of adjusting for market aborations like 9 /11 but it is TO THE DAY .. not anytime within that six months.
And as always I recommend the accountant or the attorney make that call .....
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Sink your Teeth into the A$$ of Life!!

**Jim Plante** · Posted: Mon Aug 13, 2007 6:55 pm Post subject:

**Pina Colada** · Certified General Joined: 13 Aug 2007 Posts: 565

The client is one of three brothers who inherited their father's 500-acre farm; he's the executor. The intended use is to assist in filing the estate tax return, he says.

And does the form of ownership affect the value of what each inherits? Is a 1/3 tenancy in common worth 1/3 of the value as if undivided?

**Jim Plante** · Posted: Mon Aug 13, 2007 10:13 pm Post subject:

No, but feel free to start a thread about valuing undivided partial interests. The tax is on the Estate, not the heirs' individual inheritances, and should not be pseudo-divided except on direct instructions from the attorney.
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Jim Plante

JMichael · Posted: Wed Aug 15, 2007 9:31 am Post subject:

**Edd Gillespie** · Certified General Joined: 13 Aug 2007 Posts: 2282