The assessment procedure begins with establishing land value. Appraisal theory and state law require land to be valued as if vacant. This value is determined by analyzing sales of comparable bare land. Our next step is to study sales and market trends of improved (developed or built-on) properties in a selected area. This sales analysis is used to determine total market value based on square footage, year built and other characteristics of the property. From this total value, we subtract the amount determined for land. The balance is allocated to improvements.
Real property valuations are made by our staff of accredited real estate appraisers. The total valuation represents 100% of fair market value. Market value is the amount of money a buyer, willing but not obligated to buy, would pay to a seller willing but not obligated to sell. For residential parcels, fair market value is determined by analyzing recent sales of comparable properties in the same area. Commercial properties also may be appraised using this method or by using the income or cost approach. The appraisal method used will be the one that offers the best evidence of market value.
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The comparable sales method compares the donated property with several similar properties that have been sold. The selling prices, after adjustments for differences in date of sale, size, condition, and location, would then indicate the estimated FMV of the donated property.
If the comparable sales method is used to determine the value of unimproved real property (land without significant buildings, structures, or any other improvements that add to its value), the appraiser should consider the following factors when comparing the potential comparable property and the donated property:
1. Location, size, and zoning or use restrictions,
2. Accessibility and road frontage, and available utilities and water rights,
3. Riparian rights (right of access to and use of the water by owners of land on the bank of a river) and existing easements, rights-of-way, leases, etc.,
4. Soil characteristics, vegetative cover, and status of mineral rights, and
5. Other factors affecting value.
For each comparable sale, the appraisal must include the names of the buyer and seller, the deed book and page number, the date of sale and selling price, a property description, the amount and terms of mortgages, property surveys, the assessed value, the tax rate, and the assessor's appraised FMV.
The comparable selling prices must be adjusted to account for differences between the sale property and the donated property. Because differences of opinion may arise between appraisers as to the degree of comparability and the amount of the adjustment considered necessary for comparison purposes, an appraiser should document each item of adjustment.
Only comparable sales having the least adjustments in terms of items and/or total dollar adjustments should be considered as comparable to the donated property.
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Section 6. Real Property Valuation Guidelines (IRS instructions to their employees)
1. Approach to Value --- The Valuation Process. The valuator should determine which methodologies are to be utilized in developing the opinion of value of the subject property. The valuator should consider the appropriate valuation approaches, such as the market approach, the income approach and the cost approach. Professional judgment should be used to select the approach(es) ultimately used and the method(s) within such approach(es) that best indicate the value of the property.
2. In the Market or Sales Comparison Approach, properties similar to the subject properties sold close to the valuation date are compared to the subject property. Adjustments are made for financing, condition of sale, date of sale, physical characteristics and location to indicate the value of the subject. Care should be taken to consider the number of sales available, their relative comparability, the degree and rationale for adjustments to the sales and the relative correlation and reliability of the value indications from the sales.
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Read IRS pub 946 How to depreciate property.
Read IRS pub 551 Basis of assets.
Not where they say you "can" us the assessors numbers, they don't say you must. Note also where they say to use Fair Market Value. And, I believe the only way to get to fair market value when you buy and and improvments at the same time, is to check the MLS for comparible land in the area, and use that (based on area), to value your land, the remainder is the value of the improvments.
this method saved us $24k in taxes first year (Go zone) for 4 houses in AL and MS + more on our rental in CA and our home office in CA.
Also, be sure to do a Cost Segregation Study -- saved us a bunch of money.