Is it possible to re-appraise an inherited asset to correct its step-up value?

[Phil Williamson]

There are a number of different kinds of assets which may be difficult, and possibly expensive, to accurately appraise during probate. If an heir receives an asset and thinks the value assigned by the estate is incorrect, can they have their own appraisal done at a later time?

For instance, there could be some artwork which is difficult to determine a market value. Or there could be mineral rights which are expensive to have appraised. In seems like in cases like those, it may make sense for the heir to do their own appraisal to ensure that their step-up value is accurate.

 

[zddoodah]

If an heir receives an asset and thinks the value assigned by the estate is incorrect, can they have their own appraisal done at a later time?

Of course. One can have one's assets appraised anytime one wants.

Is that really the question you intended to ask?

 

[adjusterjack]

Does this have to do with Sam's probate?

How to handle mineral rights in prior person's name that were never re-titled to decedent? · TheLaw.com

 

[Phil Williamson]

Of course. One can have one's assets appraised anytime one wants.

Is that really the question you intended to ask?

The question is more about if the value that is assigned at probate can be modified by an heir. For instance, if the heir inherits a widget that the executor valued at $100, but the heir knows it's worth $10000, can the heir have their own appraisal done so that the step-up value of $10000 is set for the asset? That way when they sell it, they pay taxes on the amount over $10000 rather than $100.

 

[Phil Williamson]

Does this have to do with Sam's probate?

How to handle mineral rights in prior person's name that were never re-titled to decedent? · TheLaw.com

Yes, related to that, although not about those troublesome rights in the other post. These are rights that are in the decedent's name (Diane). There are a lot of tiny mineral rights and royalty interests in the estate. Many of them don't appear to have any revenue associated with them to use as a basis for estimating their value. It is going to be costly to get them all appraised. Between the landmen, lawyers, and appraisers, it will be over $10k to have a proper appraisal done. We're doubtful if they are even worth that much. The estate has almost no money in it and the the heirs are reluctant to pay for all this. So the executor is thinking about having a very basic estimate done for the purposes of probate and then leave it up to the heirs to get their own appraisal done on the interests assigned to them if they want to have a more accurate step-up value.

 

[adjusterjack]

So the executor is thinking about having a very basic estimate done for the purposes of probate and then leave it up to the heirs to get their own appraisal done on the interests assigned to them if they want to have a more accurate step-up value.

This layman thinks that's a very good idea.

 

[Tax Counsel]

There are a number of different kinds of assets which may be difficult, and possibly expensive, to accurately appraise during probate. If an heir receives an asset and thinks the value assigned by the estate is incorrect, can they have their own appraisal done at a later time?

If what you really want to know is whether the IRS would accept the revised appraisal for determining the basis of the property, that is impossible to answer without the full facts regarding the estate, the assets involved, how good the estate appraisal was, and whether the estate filed a federal estate tax return or state inheritance/estate tax returns that reported a lower value than the value you hope to get with the new appraisal. That appraisal at the very least would need to be done by an independent qualified appraiser with experience in valuting the particular property involved. The IRS has its own valuation specialists who would look very closely at your appraisal, the estate's appraisal, and what was reported on the returns as well as the details of the asset itself to determine the value at the date of death. Note, though, that if a value was set for the assets on a federal return filed by the estate, the IRS will start with the presumption that the value reported on the estate returns is correct. If the IRS and the taxpayer can't agree of the valuation and hence the basis and the matter goes to the U.S. Tax Court, that court tends to pick some value between the ones offered by each party. It is worth noting that the Tax Court generally hates valuation cases because of the inherent difficulty of determining one true value for many assets. Instead there is usually a range of values that might be reasonable for that asset, and you won't know the exact value until an unrelated third party bargains to purchase it.

If indeed income tax basis is what you are looking at, consult a tax attorney first before spending a lot of money on appraisals of property. Depending on the facts, it may not be worth the effort and expense to do that.

 

[Tax Counsel]

So the executor is thinking about having a very basic estimate done for the purposes of probate and then leave it up to the heirs to get their own appraisal done on the interests assigned to them if they want to have a more accurate step-up value.

I can see the executor doing that if the estate doesn't have to pay any state or federal taxes based on the value of the assets. There would be no need for the estate to pay for a professional valuation if there is no need for it. In that case, what you want to defend your claim of the basis is a very well done professional appraisal. If the IRS valuation experts see that as within the range of likely values for the asset the examiner may simply accept that. No way to know until the return gets examined, if it ever does. However, the closer in time to the decedent's death the appraisal is done, it will carry more weight with the IRS and Tax Court.