To Appraise or Not to Appraise. That is the PROBATE question.

“How does tax value versus appraised value of real estate in the probate estate effect heirs?”

As an attorney that handles probate cases I deal with issue all the time. Clients and heirs of an estate may know little about how to assess the value of real estate flowing through an estate and why it matters. Not knowing could cost you later.

If there is real property (real estate) associated with this probate estate, then the way the property value of that real property is listed can have effect taxing of the heirs at the time of the sale of that real property. Taxable basis for capital gains tax purposes is calculated by the amount placed on inventories within the court probate file. Tax value as of the date of death of the decedent may be used to calculate the heirs tax basis in the real property. Alternatively, privately appraised value contemporaneous with the decedent’s date of death may be used. Depending on markets a private appraisal may yield a higher tax basis and fair market value than tax value.

For example:

            Tax Value at Date of Death: $100,000.

            Private Appraised Value at Date of Death: $200,000.

            Sales price of the house after heirs inherit and sell the property: $200,000.

In the above example if tax value was used in the estate process, then the heirs would share a capital gain of $100,000 which they would proportionally report on their tax returns for the year of sale of the real property. If private appraisal value is used, then there would be $0 gain so no capital gains to report on the heirs’ tax returns.

There could be a situation where a property is sold for less than tax or private appraisal value in which case the heir would take a capital loss.

These are some considerations when choosing to use tax value or appraisal value for real property in a probate estate. We are very proud of our amazing probate team and would be glad to handle and advise on your probate estate. When a loved one passes away we want to be there for you. Please contact our office for your free consult today.

Gregory S. McIntyre

Estate Planning & Elder Law Attorney

in Estate Planning, Probate, Tax Planning by Greg McIntyre Leave a comment
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