The IRS is directly targeting all land trust conservation easements; many if not most façade easements and a host of other appraisal related issues. Too many appraisers are now seeking estate work with inadequate experience. Suggestion: IF you still refer to any appraisal as a ‘date of death’ appraisal, you are NOT competent to perform it. Period. There is a power point presentation on my website covering this. If the link becomes inoperative, email and I’ll send it direct to you.( mike@mfford.com )

For EACH tax issue, IRS uses a different definition of Fair Market Value (FMV) which is NOT the same as Market Value. I’ve listed these on my website. They are applicable to the West Coast and may or may not be applicable to eastern jurisdictions. http://www.mfford.com definitions of Value tab-near the bottom of the text.

Whether you are an MAI or another experienced appraiser, delving into these waters is ‘risky’ at best. I still chat with my old associates on a near weekly basis. IRS is STILL going after tax avoidance schemes often represented by these types of appraisals. It is not a case of ‘maybe’ I’ll get audited. You WILL be audited (meaning your client will be audited) with a conservation easement deduction. Don’t count on any of the National Land Trusts to come to your aid when it happens.

For my fellow appraisers that will ignore the above caution, familiarize yourself with IRS perceptions of: imminently probable with respect to H&BU (not “reasonably probable or possible, but imminently probable and its related case law). Make sure you understand the specific FMV definitions that will be used in your jurisdiction. In all probability, the sole measure of charitable donation value will be the difference between [PRACTICAL] before and after values-not hypothesized values. Lastly ,if there is ANY kind of quid pro quo involved, the donation deduction will not be recognized (allowed) at all. If there are familial owned contiguous parcels, those will ALSO be used to calculate the before and after impact (diminished value) of the easement. its not a case of “right”-that is what the IRS will do, not necessarily what they should ethically do.

For E&G issues, its not quite as risky for an honest appraiser but be careful. KNOW the rules and procedures! Stay away from fractional interest discounting. Leave that to the CPAs! For TIC interests, nothing but partition cost related discounts are (likely) going to be recognized as being valid anyway. The more aggressive discounts for various facets of lack of marketability (DLOM); controlling-non controlling, etc. typically found in entity valuations will not survive a review appraisal involving tenants in common fractional interest discounting.

By the way-you wont know for three years! That’s about how long it takes to filter through the system. Three years of a Sword of Damocles hanging over your head, and that of the taxpayer. Three years interest and penalties plus any principle tax liability adjustment.

For those that HAVE the requisite experience, you probably don’t need my site but feel free if you do. Or call me (number is on the site) or call (714) 366 9404. This is not meant to discourage potential competition. Its meant to try to help fellow appraisers avoid trouble.

Best!

Have YOU joined the American Guild of Appraisers yet? AGA is looking out for YOU! http://www.appraisersguild.org