Inherited land sold at loss

[Margaret CPA in OH]

Client inherited land in 2006 he thought was not worth much until last year when he was offered $72,000 for mineral rights. His cousin offered to buy, client agreed to $72,000 plus what his fathr paid ($12,000) many years ago. Just now I received from the attorney an in-house appraisal from the bank that loaned the money to the cousin to buy. It is for $150,000. There was no other evaluation at date of death in September 2006 in the piney woods of Arkansas as no estate tax return was required and the attorney said they didn't have a valuation.

From my reading, cousin is not related party, transaction is long term, but what would be the cost basis. I have no way of getting the true value at dod nor does my client here in Ohio. I'm thinking the $84,000 would be fair as, in 2006, no one was thinking mineral rights. My client really isn't interested in big capital gains but he doesn't want a loss, either. Suggestions?

[zeke]

Client has not given you all required data.

#1, get an extension.

#2, A competent r/e broker in area can legally make appraisal for 2 years ago.

good luck!!

z

[Margaret CPA in OH]

Thanks, Zeke! I didn't think/know that was possible, especially two years prior. Client is coming in tomorrow so it works for me!

[Terry D EA]

Hi Margaret,

What about checking with the local Arkansas county website to see if there is a tax payment history and tax evaluation available. I do know that tax card value can be accepted as FMV at DOD in some states. Here is NC it is and when I worked with my father's estate in Ohio, that was used as well. The only problem I see with this is if the tax card value was considerable less than what the FMV would have been. Try Zillow.com and see if you input the address information in that area and it will return an estimated FMV. Hope some of this helps.

Terry D.

[kcjenkins]

There is often a big variance here on tax value vs actual FMV. Especially in those "piny woods" counties. I would say he would be much wiser to pay the reasonable fee it will cost him [probably $200 - $300] to get a written professional appraisal. They do this based on 'comparable sales' in the area at the time, plus professional judgment, and the IRS will generally not dispute these like they will the 'guesstimates' that clients are so fond of.

[Margaret CPA in OH]

KC is correct. The tax cards show a value of $860 for each of 40 acres, total of $1720. Clearly not market value. I will share this info with client tomorrow. Thanks again to all.