Real Estate Investor · Streamwood, IL · Member since 2017 · 14 posts · 5 votes
My 2 rental properties are held under my LLC, which is held under a self-directed IRA. The IRA holder needs me to provide a Fair Market Value for the properties, and use the following as a source: An appraisal, broker opinion letter, or tax assessors "estimated market value.
Each of sources will provide different values (ie. tax assessors estimated market value is almost $30,000 less than an appraisers value, as the appraised value is closer to the actual market value).
Is it in my best interest to hire for an appraisers higher value so that when I eventually sell the capital gains tax should be lower ?
I also wasn't sure if there would be unintended consequences of having them valued higher.
I plan to seek my tax advisor's input after he returns from travel. Wanted to bounce it here in the meantime.
Unless you are over age 72 or otherwise required to take distributions from the IRA, there is no tax ramification of the value. Use broker price opinion. The value is just an end-of-year number.
There are no capital gains when your IRA sells a property. The gains are tax-sheltered into the IRA.
For IRA holders subject to required minimum distributions there is a tax associated event based on the IRA account value - the calculation to determine how much of the IRA must be distributed. Many custodians will require a more formal valuation such as an appraisal in that case.