By Lew Sichelman
WASHINGTON (MarketWatch) --Question: I am concerned about property that is in my parents' trust. Since they both have died, me being the executor, I have had the home on the market in Apple Valley, Calif., since February 2006 with three different real estate companies. I also have dropped the price from $525,000 to $387,000 and still have had no bites. It is a lovely place that needs the right buyers.
Anyway, for tax purposes, how can I find an appraiser who would place a value on the house for December 2005 when my father died so I can claim a loss on the property when it sells, if it ever does? Joanna Ellis.
Answer: The direct answer to your question is that any qualified appraiser should be able to reconstruct the value of the property in question on the day your last surviving parent died. The Internal Revenue Service suggests you insist on someone who is licensed in California and a member of a professional association.
However, you needn't go to that trouble because there is no loss, at least not yet. Just because you believe the place should have sold for $525,000 and didn't doesn't mean there is a loss. You can't lose something you never had, so as long as the house eventually sells for more than your adjusted basis in the place, you'll have a gain, not a loss.
Your adjusted basis in the property is its value at the time it was inherited by you. Obviously, at this point, you'll need an appraiser to help you figure out what the fair market value was at that time. But even at that, the IRS says that "to claim and prove that you're entitled to a loss because the fair market value dropped dramatically and you sold at a much lower fair market value several months later...... would be difficult."
The eventual sales price could be documented through the closing statement, but you will need a qualified appraisal to establish that the basis (fair market value as of a certain date in time) was greater in order to claim a loss. Again, it needs to be from a qualified appraiser.
The IRS suggests that you read two publications: Sales and Other Dispositions of Assets (Pub.544) and Basis of Assets (Pub. 551). Visit the IRS Web site.
WASHINGTON (MarketWatch) --Question: I am concerned about property that is in my parents' trust. Since they both have died, me being the executor, I have had the home on the market in Apple Valley, Calif., since February 2006 with three different real estate companies. I also have dropped the price from $525,000 to $387,000 and still have had no bites. It is a lovely place that needs the right buyers.
Anyway, for tax purposes, how can I find an appraiser who would place a value on the house for December 2005 when my father died so I can claim a loss on the property when it sells, if it ever does? Joanna Ellis.
Answer: The direct answer to your question is that any qualified appraiser should be able to reconstruct the value of the property in question on the day your last surviving parent died. The Internal Revenue Service suggests you insist on someone who is licensed in California and a member of a professional association.
However, you needn't go to that trouble because there is no loss, at least not yet. Just because you believe the place should have sold for $525,000 and didn't doesn't mean there is a loss. You can't lose something you never had, so as long as the house eventually sells for more than your adjusted basis in the place, you'll have a gain, not a loss.
Your adjusted basis in the property is its value at the time it was inherited by you. Obviously, at this point, you'll need an appraiser to help you figure out what the fair market value was at that time. But even at that, the IRS says that "to claim and prove that you're entitled to a loss because the fair market value dropped dramatically and you sold at a much lower fair market value several months later...... would be difficult."
The eventual sales price could be documented through the closing statement, but you will need a qualified appraisal to establish that the basis (fair market value as of a certain date in time) was greater in order to claim a loss. Again, it needs to be from a qualified appraiser.
The IRS suggests that you read two publications: Sales and Other Dispositions of Assets (Pub.544) and Basis of Assets (Pub. 551). Visit the IRS Web site.
