Hi,
My sister and I inherited a small house from Mom when she passed in
Feb of 2000. It's been rented out ever since, but now we think it's
time to sell. We'll need to figure out what the house was worth back
then so we'll have a "stepped-up" value with which to calculate the
taxable profit/appreciation. Does anyone know a good way to accomplish
this? Prop tax records are notoriously unrealistic here in Los
Angeles, so I assume that's not a good route. My real estate agent
buddy can "pull" comparable sales figures for today, but not for 6
years ago.

Maybe there's a nifty online service out there where I can type in the
address, pay a fee and problem solved? If a GA researcher provides
that very service, I'll be happy to repost the question for bigger
bucks and list the address.

Let me know whatcha think - and thanks!

---

Clarification of Question by hyphenga-ga on 03 Aug 2006 09:02 PDT

Probonopublico, I'll check with Agent-man as you suggest, thanks.

Myoarin, I don't recall such a valuation, but I'll research a bit. I
may have misused the word "inherited" in this case - in an attempt to
keep the question simple. Mom (wisely) had a Living Trust in place
several years before she passed, so the house has been "owned" by the
Trust since 1995 or so. It still is. Technically, it never changed
hands in 2000 (thus no inheritance tax issues). Sis and I manage the
trust and file a tax return for it every year, but that's been based
on its income (from the rental and other assets) and not on its value.
Over the years, we've distributed the assets bit-by-bit and now only
the house remains, so we wanna sell it and dissolve the trust. Sorry
if this makes my original question more confusing. :-)

Whatever figure you get will have to satisfy the IRS.

I suggest that you get a current valuation and then discount it to Feb 2000 values.

Your Real Estate Agent buddy should be able to identify a Property
Price Index that you can use.

If you inherited the house six years ago, I assume that it was
included in the valuation of the estate for the calculation of
inheritance tax.  A value would have been set on the house at that
time  - within 9 months of your mother's death.  That is the value you
have to use now, even though at that time maybe a favorable, below
actual market value was accepted for the estate.

Is there any reason why this is not the case?

Take a look at your depreciation records from tax returns. You should
have been depreciatinig the house using the stepped up basis. You can
look at old assessments to figure the ratio of building to land value
& get the land value that way. Keep in mind you should only have been
taking 1/2 the depreciation, so the house basis is probably double the
basis you've used for depreciation.

If you haven't been claiming depreciation, get to a tax pro BEFORE
selling and ask about what you have to do for catch up depreciation.

Also, a living trust is a pass-through entity. Assets held by a trust
ARE included in the estate when figuring death taxes. The main
advantage of a living trust is that you avoid probate fees, which are
high in some states. The trust should have stepped up the basis in
2000. If it didn't, get to a tax pro right now.

I've found Zillow.com quite useful for this type of searches. Your
mileage may vary. The usefulness of the data they provide depends on
what records they use for your neighborhood.

http://www.zillow.com/

I've checked on the price of my house and comparables in the
neighborhood and I found that the Zillow records seem to be fairly
complete and accurate for recent sales. For example, I know that the
information they have for the house next door (which was sold three
times since 2000) is accurate. You might be able to find useful
comparable information for your neighborhood too.

The best way to go would be to have an appraisal done by a licensed
real estate appraiser.  If you ask them to appraise the house based on
its value in 2000 they should be able to give a signed report.  You
will have to be able to explain what has changed about the house since
then.

I worked for an appriaser several years ago and helped with an
appraisal on a house that had burned down more than a year before. 
Contact your local bank or real estate agent to find a licensed
appraiser.