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Ed Johnson
Ed Johnson, Tax Preparer
Category: Tax
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Experience:  GPHR Cert; U.S. Treasury Tax Advocacy Panel appointee
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I have recently become trustee of my mothers estate in Florida.

Resolved Question:

I have recently become trustee of my mother's estate in Florida. Most of what she had was in stocks or mutual funds, with me as co-trustee. The lawyer who prepared the trust tells me that I should just pay her taxes at the end of the year as tho' she were still living, then next year use the tax i.d. of the trust for future taxes. He also says that the funds come to me at the current value - rather than what she'd paid years ago. If this is the case, what do I need to prove the current value? Are the statements received a few weeks before her death sufficient proof? We have a similar quandary with her home. It has appreciated a great amount in the 50+ years she owned it. When we sell it next year, how do we prove its value at the time of her death? Are county tax assessments sufficient - or do we need to have it appraised now?
Submitted: 5 years ago.
Category: Tax
Expert:  Ed Johnson replied 5 years ago.

Dear Floridian,

 

Thank you for your question(s).

 

1. What do you need to do to prove current value? Are the statements received a few weeks before death sufficient proof? ANSWER: The IRS terminology in this matter is the Fair Market Value (FMV) as of time of death. However the IRS also allows any reasonable alternative method of appraisal or assessment, which ever benefits you most. So or stocks and mutual funds, you can use those statements, but you miss the as of date. So on an audit an auditor may hold you to that date. With stocks and mutual funds, you can get an interim statement as of the date of death, or you can even use the average of opening and closing prices on the date of death. Many people use the interim state ment or nearest statement as you are suggesting; meaning the nearest statement to the date of death before or after.

 

2 Similar Quandary with the home: ANSWER: The rule is the same; the IRS sets the cost basis as the FMV as of the date of death. For homes alternative methods of determining this are: paid appraised value; using the property tax assessor's FMV appraisal that is the basis for the assessed value of the home for property tax. Or have a Realtor or paid appraiser to conduct a FMV study on the property. Most people use the property assessors appraisal.

 

NOTE: Be careful to use the correct figure from the property appraiser's office. The assessor will appraise the FMV of the home, and then assess tax based on the assessed value, which is a percentage of the FMV. You want to use the actual FMV before making the assessment.

 

If there is a big discrepancy between what you think the property is valued at and the property tax assessor's appraisal, you may wish to pay the 350 dollars or so to have the FMV determined by a professional appraiser.

 

NOTE 2: A higher appraisal as of the date of death will benefit you more than a lower appraisal. (as beneficiaries); but a higher appraisal may result in the estate paying more tax.

 

3. How do you prove its value when you sell it? The cost basis will be the FMV as of the date of death. This is the FMV that is the same that is listed on the estate tax return or the executor's inventory of the estate.

 

4.Are the county assessments sufficient: They are as described above. The FMV you use for a cost basis needs to match the FMV used on the estate tax return or the executor's inventory (which should be the same as well). You can hire a professional appraiser if you like.

 

 

Ed Johnson, Tax Preparer
Category: Tax
Satisfied Customers: 10760
Experience: GPHR Cert; U.S. Treasury Tax Advocacy Panel appointee
Ed Johnson and 2 other Tax Specialists are ready to help you
Customer: replied 5 years ago.
Is the lawyer's advice as to filing taxes this year what you would recommend? I'm scared of the IRS..

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