The Wagner Difference


There are many situations where you need an experienced, qualified, and certified appraisal expert to determine the retrospective "Fair Market Value" (FMV Appraisal) of real property. Perhaps it is in your estate as of the date of death; or when gifting property; or donating a property.

Many estates consist of a portfolio of commercial, industrial, and residential real estate need to establish stepped up real property tax basis for IRS tax filing purposes. Determining fair market value of your estate as of the date of death can establish basis. In addition you may need a valuation expert to determine the appraised value of fractional ownership interests of the estate.

As an executor or administrator of an estate, you have been entrusted to carry out the wishes of the deceased estate plan as swiftly and exactly as possible. Federal estate tax returns are required whenever the total value of the decedent’s assets exceed the applicable filing thresholds.

IRS Tax Return Regulations requires taxpayers to obtain a "qualified appraisal" on real property by a "qualified appraiser" as per IRC Section 170(f)(11)(E)(iii)(ii). The IRS has defined the appraisal standards that must be met along with verifiable minimum education, has earned an appraisal designation from a recognized organization, and/or have equivalent experience in valuing the type of property being appraised. The residential or commercial appraiser must have experience with IRS Real Property Valuation Guidelines. Treasury Regulation Section 20.2031-1(b) requires a residential or commercial appraiser to follow the valuation guide lines when preparing a residential home or commercial real estate appraisal for tax purposes or retrospective appraisal. Moreover, the appraiser should hold a designation and be qualified as stated under regulations Section 1.170A-17(a) . Additionally, information that should be stated in the appraisal is set forth in Rev. Proc. 66-69, 1966 C.B. 1257. For example, utilizing the correct definition of "Market Value", "Use Value", "Fair Market Value", "Intrinsic Value", or "Investment Value" means the difference between a disputed appraisal and one that is prepared correctly.

Any opinion of value (appraisal) prepared by a certified residential real estate appraiser for use in planning an estate and in documents filed with the revenue authorities, should be well supported by a detailed report as to how the appraiser arrived at his conclusions. Such a report should demonstrate to the user that the appraisal is well founded, substantiated, and meets with Treasury Regulations and state agency requirements. It is also wise to avoid submitting an appraisal that is more than two years old and one that does not meet other specific IRS guide lines. Additionally, the IRS looks at the accreditation of the appraiser, the rationale of the "Fair Market Value" opinion, the validity of the comparable research, and the overall professionalism of the appraisal report.

Often, the date of death (Effective Date of the Appraisal) differs from the Date of Inspection and the Date of the Appraisal Report. As designated experienced real estate appraisers we are familiar with the procedures and requirements necessary to perform residential appraisals that match the retrospective effective date of value.

Because multiple listing services often purge data after a period of time, if the effective date of an appraisal is over 3 years the appraiser must be aware of other residential data sources and how to utilize those data sources to obtain verifiable comparable sales information.

Taxpayers may be liable for additional penalties if the valuation does not adhere to IRS Real Property Valuation Guidelines. Penalties can range from approximately 20% to 40%. In preparing an appraisal for estate tax return filing purposes the IRS requires the appraiser to follow IRS Real Property Valuation Guidelines and specific appraisal guidelines. In addition, it is also important to provide a well documented home appraisal with the appropriate valuation techniques. In some cases, this could mean the difference of whether or not the respondent is required to pay additional estate tax. Moreover, if the estate tax is later challenged in a court of law, the appraiser must be qualified to testify as an expert witness on behalf of the respondent.

Please contact Alvin “Chip” Wagner, SRA, SCRP for residential real estate appraisal needs, and we will be able to refer you to qualified certified general real estate appraisers for commercial and industrial properties, as well as personal property appraisers.