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First, I'd like to thank the 2011 Board of Directors for
their dedication, time and efforts to bring to you, the membership,
quality educational programs over this past year. It has been
my pleasure to be your President for the past 3 years. The
2012 Board of Directors has new people with new ideas, expertise,
and drive to further the goals of REAA and our Sacramento
Chapter. The Boards dedication to the membership is evidence
by the January speaker and the other offerings already slated
for this year. This year will be one of best years, in terms
of educational offerings, that we have ever had. That means
your membership dollar has become an even greater value. If
you haven't joined consider joining now. We also keep the
membership aware of new changes in our profession. Again,
thanks to the membership for your continued support of REAA,
our appraisal organization.
Frank Molinari, SRA, AVA, senior appraiser with IRS was our
January 10th 2012 dinner meeting speaker. Mr. Molinari has
over 30 years in appraisal valuation and is currently a senior
appraiser with the IRS in San Francisco.
The presentation began with a brief introduction to the IRS
that he is part of. "Its appraisers reviewing appraisers"
when it comes to property valuations that come before the
IRS. There are about 15 million returns in which taxpayers
report an event involving a valuation related issue, and the
code is over 160,000 pages. What is the IRS looking for? Causation
factors that are used in the tax payers appraisal, the supporting
evidence for the valuation factors, auditing the tax payers
underlying facts and other factors, such as, does the highest
and best use make sense and does the report logically led
the reader from the initial presentation of value to the value
conclusion.
Some of the more typical assignments for the appraisers are
estates which are valued as of the Date of Death (DOD), but
are you aware there is also an Alternative Valuation Date
(AVD) that can be used in the presentation of valuation that
can go 6 months past the DOD. This could mean that to meet
the client's needs in the assignment it may require 2 appraisals
on the subject. There are also gifts given to a relative,
donations of property to 3rd parties like municipalities,
501c (3) organizations and casualty loss (valuing property
as of the date of the casualty i.e. hurricane, earthquake,
and flood).
Problem areas that are noted by the IRS are client bias, failure
to analyze prior offers/sales on the subject property, report
writing with weak supporting information, false certifications,
lack of Realtor/Broker verification interviews, and lack of
municipality interviews (permits or lack thereof). This isn't
much different than OREA noted appraisal problem areas.
Good report writing is a start to supporting your valuation.
Avoid canned comments usually found on appraisal forms. A
well written report is one that is easy to read and leads
the reader to the same conclusions the appraiser arrived at
without great leaps of faith. Remember USPAP: collect-verify-and
analyze. This should also conclude with "and communicate
in a manner that is meaningful and not misleading".
The IRS is to be included as an intended user with the client.
Estate and gift appraisals do no go on the URAR form and do
not use the UAD, use the GP form. The IRS is not technically
a federal transaction covered by FIRREA. You should be familiar
with the IRS regulations regarding the appraisals your doing.
This includes using Fair Market Value as the value used in
an IRS appraisal. Ask for all documentation when given an
assignment like the donation agreement to be sure 100% of
the subject is being donated. Donation date is same as DOD.
Benefits to doing IRS appraisals is that the IRS does not
have an appraisal panel or approval process, no immediate
asking for additional comps, unless the client directs, but
you must not allow the client to pressure you and that you
understand the highest and best use of the property your appraising.
Donations must be on IRS form 8283 which asks for completion
by tax payers for cash contributions of over $ 500, Section
A items with a value under $ 5,000 and Section B for items
over $ 5,000 which is a section that would be signed by the
appraiser. If this form is not property filled out and signed
the donation may, and in some cases been, denied by the IRS.
The IRS is looking for an appraisal that is reasonable and
credible (worthy of belief) they are generally not as strict
in the review process as OREA, however if the report is a
bad report then the review process will intensify. There is
a part of the code 6701(a) that basically states that false
or fraudulent aiding in the understatement of a tax liability
with substantial and gross misstatements used in connection
with a return or claim for refund may subject you to penalty
under Section 6695A. That could include the appraiser.
Mr. Molinari was excellent in his presentation of this information,
which was easy to follow and to the point. Those attending
learned a great deal about the inner workings of the IRS as
it relates to our profession.
For more information: Google the IRS Valuation Code, IRS
form 8283, and IRS Fair Market Value.
Ken Hunsinger, REAA 2011 President
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