Determining Fair Market Value after Divorce or Death

(DISCLOSURE: I am not an attorney nor accountant – neither have I ever played one on TV; for ironclad advice on this topic, contact an attorney or accountant in good standing or at least one who is not serving time in jail!)

Did you just receive real estate through a divorce proceeding or inherited the house from the death of a family member? You will now need to determine your Fair Market Value of your home to help determine your TAX BASIS for when it comes time to sell the house and possibly pay capital gains taxes (or avoid them if you can demonstrate you don’t owe them). So how do you determine the Fair Market Value?

At IRS.gov, Fair Market Value is defined as: ‘The fair market value is the price at which the property would change hands between a willing buyer and a willing seller, neither being under any compulsion to buy or to sell and both having reasonable knowledge of relevant facts. The fair market value of a particular item of property includible in the decedent’s gross estate is not to be determined by a forced sale price. Nor is the fair market value of an item of property to be determined by the sale price of the item in a market other than that in which such item is most commonly sold to the public, taking into account the location of the item wherever appropriate.’ Regulation §20.2031-1.”

Pulling recent sales from web sites is a good start, however, if you want to be satisfied that you’ve carried out due diligence, I strongly advise you to hire a licensed appraiser (roughly $400-$600 in 2020 dollars) who can take a look at the property and give you a bona fide valuation of the property at this point in time.

Check out these IRS publications for more information:

Publication 551, Basis of Assets

Publication 559, Survivors, Executors, and Administrators

Publication 555, Community Property

Sometimes in a self-justification moment to save a few hundred bucks, I’ve seen owners grab some sales from Zillow, et. Al, thinking those sales numbers are enough to satisfy an IRS regulation. Don’t fool around with your money this way. At the least – contact a real estate agent who can pull comparables for the property so you can determine what value to put in that little IRS box in the future when you sell the house.

Until next time..

Who is Anthony Carr? I’m a seasoned, stable real estate professional and I’ve counseled investors, sellers and buyers since 1995 in the Northern Virginia, DC and MD market. I wrote a book several years ago, “Real Estate Investing Made Simple: a commonsense approach to building wealth”, after working as a real estate editor for several years (where I wrote hundreds of columns on the subject) before diving into this game we call real estate!

Determining Fair Market Value After Divorce or Death
Anthony Carr

Anthony Carr is a seasoned Associate Broker with RE/MAX West End, a powerful office serving the whole VA|MD|DC market. He has helped sellers, buyers and investors just like you who desire to build their personal wealth through homeownership. Working with Anthony and his team, you'll benefit from the deep experience he has corralled from his diverse career - investor, Realtor, published author, blogger and problem solver. Anthony authored the book “Real Estate Investing Made Simple: A commonsense approach to building wealth”; and was a contributing writer to the book, “The Best Real Estate Advice I Ever Received." He is married to his bride Corinne; father to Andrew, Austin, Rachel and Robyn; and Pop-Pop to three energetic grand kids!

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