Inherited house not (yet) sold

[Kea]

I've been trying to sell my late father's house since last July. (I would have put it on the market sooner, but I was kinda busy the first few months of the year.) Since it has now been a year since his DOD and there are no "nibbles" yet, do I need to get an official appraisal? I know if it sells reasonably soon after DOD, you can use the selling price as the basis. I've always understood that to be one year. Or, is some other time-frame more appropriate? I do have the real estate agent's estimate of FMV on DOD, but that is now much higher than the current offering price.

Thanks.

[Pacun]

I've been trying to sell my late father's house since last July. (I would have put it on the market sooner, but I was kinda busy the first few months of the year.) Since it has now been a year since his DOD and there are no "nibbles" yet, do I need to get an official appraisal? I know if it sells reasonably soon after DOD, you can use the selling price as the basis. I've always understood that to be one year. Or, is some other time-frame more appropriate? I do have the real estate agent's estimate of FMV on DOD, but that is now much higher than the current offering price.

Thanks.

You need to use the FMV of either DOD or 6 months later.

[Kea]

I know that part. It's just that typically you can use the selling price as FMV if it is "soon enough." Since it didn't sell in one year, do I need an official appraisal? Or, do I have a few month leeway to still use the selling price?

Thanks.

[Pacun]

I know that part. It's just that typically you can use the selling price as FMV if it is "soon enough." Since it didn't sell in one year, do I need an official appraisal? Or, do I have a few month leeway to still use the selling price?

Thanks.

You can get the FMV on those dates without an official appraisal and use that as your basis. You just need to have some documentation but an official appraisal. I hope someone can give you some websites to help you.

[Kea]

Zillow.com, the real estate agent and the county appraisals were all had similar values. That is what we used when we listed the house in July (DOD = 1/5/09). The price has been reduced 3 times since then and there has still not been any interest. So I feel that value is way too high. Of course if I do use that as my basis, I'll have carryforward losses for many years or decades.

[mcb39]

Quickfinder; page 7-15, as well as 1040 Express Answers state that "the basis of an inherited house equals FMV at the time of decedent's death, or the alternate valuation date, if used." You would probably use an alternate valuation date if you had done any improvements (increase) or something caused the house to lose value (decrease). Also, remember that inherited property is always considered to have been held long term. You could also realize a Capital Loss.

What about the valuation on the tax bill for 2009; which should have arrived by now. They always state both the Assed Value and the Fair Market Value. I don't think you need to be overly concerned here unless you are realizing a very large gain or loss. IMO

[Kea]

If I use any of the figures available for 2009 as the FMV, I would most likely have a very large loss -- most likely over $100K. If I had taken the one offer that came in, that would have been $170K less than the county appraisal / real estate agent's estimate or Zillow.com (that's why I didn't take it).

[mcb39]

I don't think you have any choice unless you hold it until this distressed RE market turns around (if ever). It is what it is. You cannot just put a price on it. If you have proof of FMV on the date of death and choose to sell it at a loss, wouldn't the IRS have to accept that you have a LT carryover loss for however many years it takes?

[kcjenkins]

Why would you want to use the selling price as basis when you know that the current price will be much less than it's FMV at the DOD? That loss is still of some value after all.

[Kea]

I just figured those estimates to be too high since it couldn't sell for that - even in July or August. While having a perpetual capital loss carryforward is helpful, I just figured that big a loss would seem unrealistic to IRS. I really want to stay under their radar.

[jainen]

>>it couldn't sell for that - even in July or August<<

I agree. Fair Market Value is determined by the market, and only suggested by real estate agents, county assessors, and internet sites. Suppose the market had been strong and the property sold immediately for $35,000 more than the asking price--would you be willing to pay tax on $35,000 "gain"?

We don't know how the IRS will react to large real estate losses when they look at 2008 and 2009 returns. To put your mind at ease, discuss the issue with a certified fee appraiser.

[Kea]

Well, I was really hoping the house would sell within a year so I could use that price for the basis -- high or low. One year is the "rule of thumb" I've heard, but wasn't sure if there was anything official. All I remember from the IRS instructions is "reasonable time." I'm still hoping it will sell soon. How long can I stretch that "reasonable time"? I'm willing to go the certified appraisal route, especially since it's been so long.

Thanks to all.

[jainen]

>>I'm willing to go the certified appraisal route<<

Having a current appraisal from the most famous name in town might attract offers. You would probably not have to order a retroactive appraisal, if you keep excellent notes of your discussion with the professional who is already looking closely at construction quality and market trends.