[WSBAPT] Valuation of Property: List Price vs. Net Proceeds?
Andrekita Silva
ak at seattle-silvalaw.com
Fri Jun 24 18:25:13 PDT 2022
Law Office of
F.ANDREKITA SILVA
_______________________________________________________
June 24, 2022
Brent,
I agree with the personal representative. The goal is to get the best
value for all beneficiaries. If you sell a home on the open market for
$250K, and you must pay $20K in costs of sale, etc. (commissions), the
beneficiaries share $230K.
If a family member is willing to buy the home for $250K (minus $20K
for commission), why not help a family member buy this mobile home?
So, buying member shouldn’t get a break on those costs that are
associated with buying the asset, just the sale costs, like
commission(s).
The problem I see right now is that housing is climbing so fast, other
beneficiaries might think that homes are selling for more than
appraised and/ or listing prices. So they might think that they will
net more if sold on the open market, even after paying costs of sale.
Maybe you can have PR do the math and show it to other beneficiaries.
Maybe PR can reach a consensus with other beneficiaries. If some
beneficiaries still think they can do better by selling on the open
market, maybe that beneficiary(ies) can take on the responsibility to
try to sell as “for sale by owner.” [Although that puts PR in the
position where they are doing some work they don’t really want to have
to do.] If beneficiaries don’t get any bites in a couple weeks time,
maybe they will be more flexible. I don’t think mobile homes are
selling quite as fast as other homes because the fees being charged by
mobile home parks have climbed so high.
In family law matters, the FMV is commonly negotiated. If a case goes
to trial and one party wants to stay in the home, caselaw does not
permit the judge to consider the costs to sell unless a sale of the
home is imminent.
But, if a settlement is being negotiated, it’s not uncommon for the
selling party/spouse to discount the appraised value. They don’t have
to. But, if the parties can’t agree and the home must be sold, both
parties receive lower net proceeds due to costs of sale. So, reaching
an agreement on something in between can benefit both parties and
facilitate a settlement.
When unmarried partners by a home together, and where a separation
contract is prepared, it is common to set forth a mechanism or process
for determining FMV in case one party wishes to buy out the interest
of the other ( or in case both want to buy out the other.)
It seems the same principles apply in your case.
andrekita
Law Office of F. Andrekita Silva
1325 Fourth Avenue, Suite 2000
Seattle, Washington 98101
206-224-8288
www.seattle-silvalaw.com
Quoting Brent Williams-Ruth <brent at williams-ruthlaw.com>:
> Thank you all for the input.
>
> I will tell you that we are not talking taxable at all. My
> concern is that there are 7 beneficiaries, this is the only asset.
> There is a private party willing to purchase - and no, I do not know
> if there is any connection as to why the Executor would want to save
> them money - and the Executor is staying adamant that since they
> don't need to use a Real Estate agent to list the mobile home, that
> the Executor can reduce the "market valuation" by the amount of what
> would have been paid in commission.
>
> This is a very modest estate - less than $250k total - which is
> why I worry that some of the beneficiaries may take issue with the
> fact that the amount available for distribution will be reduced by
> about $20,000. The essence of her argument is that the end amount
> would be about the same IF a Real Estate agent is used, and since
> they are not using a professional Real Estate agent that its
> appropriate to lower the price.
>
>
>
> BRENT WILLIAMS-RUTH (pronouns: he/him)
> /Attorney-At-Law/
>
> LAW OFFICES OF BRENT WILLIAMS-RUTH, A DIVISION OF BWR CONSULTING, PLLC
>
> PHYSICAL ADDRESS: 500 S 336TH STREET, SUITE 214; FEDERAL WAY, WA 98003
>
> **EFFECTIVE IMMEDIATELY** ALL MAIL SENT THROUGH THE USPS
> SHOULD BE SENT TO THE FOLLOWING ADDRESS: PO BOX 3319; FEDERAL WAY,
> WA 98063
>
> Office/Scheduling Phone: (253) 285-7751
>
> Direct: (253) 285-7453
>
>
>
> e-mail[1] / website[2] / facebook[3] /
>
> On Thu, Jun 23, 2022 at 9:36 PM Joshua McKarcher
> <josh at mckarcherlaw.com> wrote:
>
>> This is a good reason to ensure the CPA preparing estate/trust
>> returns understands these points so that such losses (or in other
>> cases, taxable income) can properly be distributed timely (in the
>> case of income) and reported out to beneficiaries for (usually)
>> maximum tax efficiency. Also a good reason to review such returns
>> before finalized.
>>
>> ___ ___
>>
>> ____(A fiduciary client recently used H&R Block for what they
>> assumed was a simple irrevocable trust income tax return before the
>> CPA or I knew. Gah. Thankfully it made a difference of hundreds of
>> dollars and not thousands of dollars.)____
>>
>> _______ _______
>>
>> ________Now, for some reason I have this feeling that Brent’s
>> client isn’t angling about any of this – but I’m happy to be wrong.
>> 😉________
>>
>> ___________ ___________
>>
>> ____________FROM: wsbapt-bounces at lists.wsbarppt.com
>> <wsbapt-bounces at lists.wsbarppt.com> ON BEHALF OF Philip N. Jones
>> SENT: Thursday, June 23, 2022 9:03 PM
>> TO: WSBA Probate & Trust Listserv <wsbapt at lists.wsbarppt.com>
>> SUBJECT: Re: [WSBAPT] Valuation of Property: List Price vs. Net
>> Proceeds?____________
>>
>> _______________ _______________
>>
>> ________________If the question is how the sale is treated
>> for fiduciary income tax purposes, here is the
>> answer:________________
>>
>> __________________ __________________
>>
>> ____________________Let’s assume that the house is sold on
>> the open market a few months after the date of death, through the
>> services of a professional real estate broker. That sale usually
>> determines the fair market value of the residence, and it is not
>> unreasonable to use that sale price as the fair market value on the
>> estate tax return and as the post-mortem income tax basis of the
>> residence. But how are the broker’s commission, the title
>> insurance premium, and related closing costs handled for tax
>> purposes? The expenses of sale are usually not deductible on an
>> estate tax return under §2053(a)(2) or against ordinary income for
>> fiduciary income tax purposes. Instead, those expenses are offsets
>> against the selling price to reduce gain or to increase loss.
>> /Scull v. Commissioner/, T.C. Memo 1994-211, n. 14. But because
>> the sale price is also the basis, offsetting those closing costs
>> will produce a capital loss. That loss can be offset against
>> capital gains, and if the losses exceed the gains (as noted above),
>> the excess can be deducted up to $3,000 per year against ordinary
>> income. If the sale takes place in the final year of the estate
>> (and modest estates often have only one tax year, which is both the
>> first tax year and also the final tax year), then the loss flows
>> out to the beneficiaries, who can use the loss to offset their own
>> capital gains, and any net loss of each beneficiary can be deducted
>> against ordinary income by each beneficiary up to $3,000 per year
>> under §1211(b). §1.642(h)-1(c).____________________
>>
>> ______________________If a discount is granted to reflect the
>> absence of a broker, my guess is that the FMV is the higher of the
>> two prices, but I can’t offer any authority on
>> point.______________________
>>
>> ________________________Phil Jones ________________________
>>
>> __________________________ __________________________
>>
>> ____________________________ ____________________________
>>
>> ______________________________Philip N.
>> Jones______________________________
>>
>> ________________________________Duffy Kekel
>> LLP________________________________
>>
>> __________________________________900 S.W. Fifth Ave. Suite
>> 2500__________________________________
>>
>> ____________________________________Portland, OR
>> 97204____________________________________
>>
>>
>> ______________________________________pjones at duffykekel.com______________________________________
>>
>> ________________________________________(503) 226-1371 –
>> office________________________________________
>>
>> __________________________________________(503) 853-1482 –
>> cell__________________________________________
>>
>> ____________________________________________(503) 226-3574 -
>> fax____________________________________________
>>
>> _________________________________ _________________________________
>>
>> ___________________________________FROM:
>> wsbapt-bounces at lists.wsbarppt.com[4]
>> <wsbapt-bounces at lists.wsbarppt.com> ON BEHALF OF Joshua McKarcher
>> SENT: Thursday, June 23, 2022 5:49 PM
>> TO: WSBA Probate & Trust Listserv <wsbapt at lists.wsbarppt.com>
>> SUBJECT: Re: [WSBAPT] Valuation of Property: List Price vs. Net
>> Proceeds?___________________________________
>>
>>
>> _____________________________________ _____________________________________
>>
>> _______________________________________Excellent, Bruce, and
>> “Oops, Josh.” I made an assumption I should not have: I took
>> Brent’s price if “listed for sale on the open market, regardless of
>> commissions, fees, taxes - that would be subtracted” to mean the
>> _resulting gross sale price_ arising from negotiations on that
>> listing between arm’s length seller/buyer neither with any
>> desperation to buy/sell, etc. _______________________________________
>>
>>
>> _________________________________________ _________________________________________
>>
>> ___________________________________________I did _not_ mean
>> any tax agency would accept a bare “listing price” without more –
>> my apologies on that one.___________________________________________
>>
>>
>> _____________________________________________ _____________________________________________
>>
>> _______________________________________________Bruce, I
>> certainly understand it as you have described it, yes. Thanks for
>> the excellent clarification. Best,
>> Josh_______________________________________________
>>
>>
>> _________________________________________________ _________________________________________________
>>
>> ___________________________________________________FROM:
>> wsbapt-bounces at lists.wsbarppt.com[4]
>> <wsbapt-bounces at lists.wsbarppt.com> ON BEHALF OF Bruce Moen
>> SENT: Thursday, June 23, 2022 6:32 PM
>> TO: WSBA Probate & Trust Listserv <wsbapt at lists.wsbarppt.com>
>> SUBJECT: Re: [WSBAPT] Valuation of Property: List Price vs. Net
>> Proceeds?___________________________________________________
>>
>>
>> _____________________________________________________ _____________________________________________________
>>
>> _______________________________________________________I
>> think neither. Allard v Pacific Bank says to test the market by
>> listing or an independent
>> appraisal._______________________________________________________
>>
>>
>> _________________________________________________________ _________________________________________________________
>>
>> ___________________________________________________________I
>> understand the fmv to be the gross sales price after listing the
>> sale to the public (or an appraisal -not a realtors opinion
>> letter). Not the net proceeds and not the listing
>> price.___________________________________________________________
>>
>>
>> _____________________________________________________________ _____________________________________________________________
>>
>>
>> _______________________________________________________________Anyone have
>> a different understanding or
>> authority?_______________________________________________________________
>>
>>
>> _________________________________________________________________ _________________________________________________________________
>>
>>
>> ___________________________________________________________________ Bruce
>> Moen___________________________________________________________________
>>
>>
>> _____________________________________________________________________ _____________________________________________________________________
>>
>>
>> _______________________________________________________________________FROM: wsbapt-bounces at lists.wsbarppt.com[4] <wsbapt-bounces at lists.wsbarppt.com> ON BEHALF OF Joshua
>> McKarcher
>> SENT: Thursday, June 23, 2022 3:47 PM
>> TO: WSBA Probate & Trust Listserv <wsbapt at lists.wsbarppt.com>
>> SUBJECT: Re: [WSBAPT] Valuation of Property: List Price vs. Net
>> Proceeds?_______________________________________________________________________
>>
>>
>> _________________________________________________________________________ _________________________________________________________________________
>>
>>
>> ___________________________________________________________________________I’m with you, and I think tax agencies would be if a taxable estate. There is something missing here: why does the distinction matter? And why would she want to ‘list’ it this way? Any chance the buyer is a related party to her or something?
>> ___________________________________________________________________________
>>
>>
>> _____________________________________________________________________________ _____________________________________________________________________________
>>
>>
>> _______________________________________________________________________________FROM: wsbapt-bounces at lists.wsbarppt.com[4] <wsbapt-bounces at lists.wsbarppt.com> ON BEHALF OF Brent
>> Williams-Ruth
>> SENT: Thursday, June 23, 2022 4:17 PM
>> TO: WSBA Probate & Trust Listserv <WSBAPT at lists.wsbarppt.com>
>> SUBJECT: [WSBAPT] Valuation of Property: List Price vs. Net
>> Proceeds?_______________________________________________________________________________
>>
>>
>> _________________________________________________________________________________ _________________________________________________________________________________
>>
>>
>> ___________________________________________________________________________________Mighty Brain Trust
>> - ___________________________________________________________________________________
>>
>>
>>
>> _____________________________________________________________________________________ _____________________________________________________________________________________
>>
>>
>>
>> _______________________________________________________________________________________Decedent passed owning a mobile home. There is a person who wants to purchase said mobile home. Executor obtained a market valuation but then said that the value would be less because it's a private sale and won't need to use a real estate agent (thus no
>> commissions). _______________________________________________________________________________________
>>
>>
>>
>> _________________________________________________________________________________________ _________________________________________________________________________________________
>>
>>
>>
>> ___________________________________________________________________________________________She wants to officially list the market value as being this lower
>> figure. ___________________________________________________________________________________________
>>
>>
>>
>> _____________________________________________________________________________________________ _____________________________________________________________________________________________
>>
>>
>>
>> _______________________________________________________________________________________________Has anyone had ever dealt with this? To me, market value is what it would be listed at if listed for sale on the open market, regardless of commissions, fees, taxes - that would be subtracted. To me, it wasn't about the net amount that would come after a sale but the list
>> price. _______________________________________________________________________________________________
>>
>>
>>
>> _________________________________________________________________________________________________ _________________________________________________________________________________________________
>>
>>
>>
>> ___________________________________________________________________________________________________The statute does not seem to help and I am not finding case law that is on point with my
>> thoughts. ___________________________________________________________________________________________________
>>
>>
>>
>> _____________________________________________________________________________________________________ _____________________________________________________________________________________________________
>>
>>
>>
>> _______________________________________________________________________________________________________Appreciate
>> insights. _______________________________________________________________________________________________________
>>
>>
>>
>> _________________________________________________________________________________________________________ _________________________________________________________________________________________________________
>>
>>
>>
>> ___________________________________________________________________________________________________________Thank
>> you!___________________________________________________________________________________________________________
>>
>>
>>
>> _____________________________________________________________________________________________________________BRENT WILLIAMS-RUTH (pronouns:
>> he/him)
>> /Attorney-At-Law/_____________________________________________________________________________________________________________
>>
>>
>> _______________________________________________________________________________________________________________LAW OFFICES OF BRENT WILLIAMS-RUTH, A DIVISION OF BWR CONSULTING,
>> PLLC_______________________________________________________________________________________________________________
>>
>>
>> _________________________________________________________________________________________________________________PHYSICAL ADDRESS: 500 S 336TH STREET, SUITE 214; FEDERAL WAY, WA
>> 98003_________________________________________________________________________________________________________________
>>
>>
>> ___________________________________________________________________________________________________________________**EFFECTIVE IMMEDIATELY** ALL MAIL SENT THROUGH THE USPS SHOULD BE SENT TO THE FOLLOWING ADDRESS: PO BOX 3319; FEDERAL WAY, WA
>> 98063 ___________________________________________________________________________________________________________________
>>
>>
>> _____________________________________________________________________________________________________________________Office/Scheduling Phone: (253)
>> 285-7751_____________________________________________________________________________________________________________________
>>
>>
>> _______________________________________________________________________________________________________________________Direct: (253)
>> 285-7453_______________________________________________________________________________________________________________________
>>
>>
>> _________________________________________________________________________________________________________________________e-mail[1] / website[5] / facebook[6] / _________________________________________________________________________________________________________________________
>>
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Links:
------
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[2] http://www.williams-ruthlaw.com/
[3] http://www.facebook.com/bwrlaw
[4] mailto:wsbapt-bounces at lists.wsbarppt.com
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