Selling inherited home
The Michael
within a 2-3 months of death. The real estate agent tells
us there will be no measurable increase in value that short
time.
Are we obligated in any way by the IRS to come up with
formal appraisal(s) in this case or can we sell in
accordance with the real estate agent's estimate and
consider capital gains zero in this case?
TIA
Mike (state=Illinois)
D. Stussy
For income tax purposes, no. For estate tax purposes,
probably - in that an accurate valuation should be done,
especially if there's an estate tax due or one's really
close to the threshold.
Dick Adams
> My wife inherited her parents' home and plans to sell it
> within a 2-3 months of death. The real estate agent tells
> us there will be no measurable increase in value that short
> time.
>
> Are we obligated in any way by the IRS to come up with
> formal appraisal(s) in this case or can we sell in
> accordance with the real estate agent's estimate and
> consider capital gains zero in this case?
> Mike (state=Illinois)
I do not believe that reliance on the opinion of a real
estate agent will go over well in Tax Court. It is in
your best interest to have an appraisal.
Dick
jga...@ggfcm.com
IRS has routinely accepted the sales price within three
months after death as evidence of fair market value, which
would be your income tax basis in the inherited property.
--
Jon J. Gallo
Greenberg Glusker Fields Claman & Machtinger LLP
Los Angeles, CA.
MBakercpa
> My wife inherited her parents' home and plans to sell it
> within a 2-3 months of death. The real estate agent tells
> us there will be no measurable increase in value that short
> time.
>
> Are we obligated in any way by the IRS to come up with
> formal appraisal(s) in this case or can we sell in
> accordance with the real estate agent's estimate and
> consider capital gains zero in this case?
If you sell the home within the first six months after
inheriting it, you do not need an appraisal.
kam...@infinet.com
> My wife inherited her parents' home and plans to sell it
> within a 2-3 months of death. The real estate agent tells
> us there will be no measurable increase in value that short
> time.
>
> Are we obligated in any way by the IRS to come up with
> formal appraisal(s) in this case or can we sell in
> accordance with the real estate agent's estimate and
> consider capital gains zero in this case?
> Mike (state=Illinois)
If it really sells within 2-3 months then you have a pretty
good argument that it will not go up much in value. I am
assuming there is no estate tax nor does any court require a
formal estimate of estate value?
In any case, the real estate agent should always be asked
--estate or not -- to prepare for you a listing of
comparitive sales to prove to you that the asking proce is
reasonable. You can use this listing to demonstrate the
value, if you are ever asked.
I would say you could also ask the real estate person to
have someone in that office to prepare a formal appraisal at
no cost, in order to secure you as a client, and I doubt
that's a confluict of interest.
The commission you pay is probably going to eat up any
increase in value over the 3 months anyway. If commissions
ar 6%, is real estate really increasing 24% per year? If
not, you have no worries. You could list the sale on
Schedule D, listing cost equal to sales price so no gain or
loss. Show it long term by the way, with acquisition date
"INH."
--
Art Kamlet Columbus, Ohio kam...@infinet.com
HELJAN gal
> within a 2-3 months of death. The real estate agent tells
> us there will be no measurable increase in value that short
> time.
>
> Are we obligated in any way by the IRS to come up with
> formal appraisal(s) in this case or can we sell in
> accordance with the real estate agent's estimate and
> consider capital gains zero in this case?
Actually, if you don't use the home and it is considered an
investment property and you lose money (commissions, etc),
you may have a deductible loss. I would not worry about an
appraisial other then your real estate agent.
Helen, EA in PA
Member of NAEA, NATP and the Tax Gang
Newest Member to the Electronic Tax Admin. Advisory Committee (ETAAC)
William P. Brown
> My wife inherited her parents' home and plans to sell it
> within a 2-3 months of death. The real estate agent tells
> us there will be no measurable increase in value that short
> time.
>
> Are we obligated in any way by the IRS to come up with
> formal appraisal(s) in this case or can we sell in
> accordance with the real estate agent's estimate and
> consider capital gains zero in this case?
I believe it is the obligation of the executor of the estate
to come up with a fair market value on the date of death.
Given that, your basis would be that value and your gain or
loss the difference between your net proceeds and your
basis.
If the value of the property hasn't changed much you could
easily have a small loss due to selling and closing costs.
If, since your in-law's death, your wife has held the home
as investment property, that long-term capital loss would be
deductible on Schedule D. To preserve the deductibility of
any loss it is important that neither your wife nor any of
her relatives use the home as a personal residence after the
date of death. If the house is personal use property in your
wife's hands, the loss would not be deductible. Of course,
any gain would be reported on Schedule D as well.
Regards,
Bill
--
Associate Professor of Accounting
School of Business & Economics, Longwood College
http://web.lwc.edu/staff/wpbrown/wpbrown.htm
(Opinions expressed are mine, not my employer's.)
Paul A. Thomas
> My wife inherited her parents' home and plans to sell it
> within a 2-3 months of death. The real estate agent tells
> us there will be no measurable increase in value that short
> time.
>
> Are we obligated in any way by the IRS to come up with
> formal appraisal(s) in this case or can we sell in
> accordance with the real estate agent's estimate and
> consider capital gains zero in this case?
You should have an appraisal done now, for the value as of
the date of death, if this was not done by the estate in
their effort to value all the estate's assets. Then there
will be a reportable gain or loss on the sale based on the
sales price, less the sales costs and basis from the
appraisal. One thing you don't want is for the IRS to ask
how you arrived at the basis, or risk them revaluing your
basis in the house.
The sale will be a reportable event.
--
Paul A. Thomas, CPA
Athens, Georgia
tax...@negia.net
DORFMONT
to be worth what it was sold for, for estate tax purposes,
unless it was sold to a relative or other at less than fair
market value. An open market sale should pose no problem.
Linda
Ron Carpenter
> My wife inherited her parents' home and plans to sell it
> within a 2-3 months of death. The real estate agent tells
> us there will be no measurable increase in value that short
> time.
>
> Are we obligated in any way by the IRS to come up with
> formal appraisal(s) in this case or can we sell in
> accordance with the real estate agent's estimate and
> consider capital gains zero in this case?
I often use the sales price to show the FMV on the date of
death if the sale takes place in a short period of time
after death. My arguement is that as long as the sale is a
bonified arms length deal it is the most accurate appraisal
you can get. Anybody who doubts this should get three
appraisals from three different appraisors on the same
property.
That said, if there was some reason the value may have
changed the appraisal might be justified.
It is also my opinion that as long as the heirs have not
used the property as their personal residence, there will
actually be a capital loss on the sale because the selling
expenses increase the basis.
Ron Carpenter, E.A.
The Michael
no one is living in the home. A real estate agent did
provide us sales of comparable homes in the area.
We may have a private buyer (the next door neighbor says his
brother would be very interested in buying it). If we end
up selling to him we will not bother to list it, but will
grant him part of the savings on commission; otherwise we
will list it with the agent we have already spoken to.
Mike
Drewremedy
Be careful in what you say--I did not read your original post.
If you hold a property off the market, not available for
rent, then any costs of holding it (insurance, repairs etc)
and any loss upon its sale is NOT deductible. But a gain
would be taxable, most likely at LT rates since its
inherited property. Nobody said the tax code is fair.
Often apppraisals for estate purposes are compassionately
low--not always the best number if you sell it for
more--think your plan and uses thru. And an agent who
hopes to gain a listing is not exactly unbiased and could be
"off" quite a bit. (low - if they think they can make a
quick sale and get full commission: high-if they think you
want to hear a high number and any number of reasons) It
might make sense to get a second written opinion ,
independent of the first?
A property is in service if it is available and listed for
rent--doesn't mean you have to actually rent it to the first
deadbeat who comes by, and have all prospective buyers
turned off by tenant issues. It can get a bit grey but don't
shoot yourself in the foot. What happens if after 8 months
the neighbor's brother really cannot come up with the cash?
To speed things along it might make sense to list it (at a
slightly higher $ number) but to have an exclusion for that
specific person. Agents will tell you they don't like
this--but all in all I think it puts some pressure on all to
move ahead. I'd give some serious thought to a rental
listing perhaps at the high end of FMV for paper purposes.
Ask your tax pro to explain. If you dally too long you can
run into some serious problems with your insurance company
over an empty house!!