Estate Valuation More Than Actual ???
Q: Ok, mom (a widow) died on February 15th so we filed her estate tax return this week. Most of her assets were in a living trust that named my wife and her brother as 50/50 beneficiaries/successor trustees. The realtor prepared a statement last summer (when we were gathering estate tax preparation items) that her condo is worth $75,000, but we've had no offers and it's been on the market since July. Since it's in Florida, we figure that the real "condo season" is just beginning. Anyway, I asked the accountant who prepared Form 706 what happens if the condo sells for let's say $70,000 with about $5000 in closing costs and in costs to carry it for more months ahead. He said that we were out of luck, that the tax is based on the value at death (or 6 months later, as was our case) and that if you overestimate it, too bad. Also he said that the rules are the same as for personal residences...no deductions for selling costs and carrying costs, etc. Yet, he did deduct the carrying costs up to the date of filing the return. Here's my question: had the condo sold prior to filing Form 706, wouldn't we have only paid tax on the NET sales price? If so, why do we get penalized if no sale can be done within 9 months? Also, why weren't we allowed to estimate the expenses (real estate commission, at least) for selling? Did this accountant, who otherwise seems to have really known well what he was doing (we think!) give bad advice? In reality, my guess is that the condo will sell for between 70 and 75K, with commissions and closing costs of about 5 grand. It's costing between $200 and $300 per month to maintain and we don't know WHEN it will sell. In a 49% estate tax bracket, this approximately 10 grand shortfall (versus the amount amount on Form 706) will cost us effectively 5 grand in extra tax. Can we go back and file an amended return? Is it worth it? The return is very clean as mom's assets were almost all common stocks. While I know that amended returns generally attract unwanted attention, there is truly nothing to argue about here other than the condo value. Again, we were pleased with this accountant's work so far, but didn't realize this issue until the return was already in the mail to the IRS. He is in Florida and was highly recommended as doing MANY of these each year. He certainly did seem to know the nuances of the system. What do you tax experts think?
A: -There is at least one other option, if the condo is rented out or held openly available for rent and not used personally or held "empty and unavailable for rent" then it is a rental property. Your costs to manage it are deductible,