When you receive an appraisal for your estate or trust, you can be certain that it will undergo intense scrutiny. Every discount and deduction you claim will be closely examined by the IRS, and the more you claim, the more stringent the requirements will be. Under these conditions, it is crucial to ensure that your appraisal and all valuations of property are accurate. Here are a few tips to ensure that your estate or trust appraisal is accurate.

Ensure All Required Information Is Present

An accurate appraisal is crucial for tax purposes, where it will serve to provide the basis of value for establishing your tax burden. This means that submitting all of the necessary information is crucial. When submitting an appraisal report with your tax return, it is important that it contain the following information:

  • Information about the property
  • The date of the valuation
  • The fair market value of the property
  • Details of the valuation
  • The terms of the agreement with the appraiser
  • The appraiser’s identifying information and signature
  • A declaration from the appraiser in the report compliant with IRS requirements
  • The appraiser’s signature

There will generally be additional requirements for information depending upon how the property is being used. For example, if the property is being gifted, there will be additional specific requirements. It is important to let your appraiser know the intended purpose of the appraisal so that they can help you ensure that you have all of the information that you need.

Choose a Quality Appraiser

The best way to ensure that your appraisal is accurate and accepted by the IRS is to choose a qualified appraiser that has received their designation from one of the respected professional appraisal organizations. Even though this may not be required by the IRS, you can be sure that they will take note of it. If the appraisal includes real estate, then it is also important to ensure that the appraiser holds a license in the state the property is within. Finally, make sure that the person preparing the appraisal has not been forbidden under Section 330(c) from practicing before the IRS in any of the three years before the date of the appraisal.

Ensure the Correct Type of Value Is Being Used

It is important to ensure that the correct definition of value is being applied in the appraisal. For example, IRS generally considers the “fair market value (FMV)” of property when considering the accurate value of an item. According to the IRS, this is “the price that property would sell for on the open market. It is the price that would be agreed on between a willing buyer and a willing seller, with neither being required to act and both having reasonable knowledge of the relevant facts. If you put a restriction on the use of property you donate, the FMV must reflect that restriction.” If an appraisal was prepared with another purpose in mind, such as insuring property, it might not meet this definition of value.

When including an appraisal report with an estate, it is bound to undergo considerable scrutiny. Ensure that your appraisal considers these tips and that your appraiser is aware of the intent of the report before it is performed. This will help them to ensure that your appraisal meets all of the IRS’s needs and help ensure that you do not pay any more than your fair tax share.

Contact Us

For an accurate appraisal of your property, contact Manzi Appraisers & Restorers. Our team has been helping individuals and businesses with professional valuations and appraisals for more than twenty years. Call us at 617-948-2577 and connect with us on Facebook.