The fair market value of a note is less than its cost
The fair market value (FMV) of most notes and mortgages is less than their unpaid balances, cost, or face value. I have appraised and invested in IRAs for the past 35 years, and I have frequently found that most note holders overpay taxes and fees related to IRAs, estates, trusts, and estates. The dollar amount of the overvaluation is large; the fair market value can be 20% to 40% less than the unpaid balance or face value. Overpaying federal and state taxes and administrative fees on the inflated value of note investments, year after year, costs a lot of money. Unsuspecting and unsuspecting investors are throwing money away.
What Causes Overpayments?
The misinterpretation of the definition of “value” used by the Internal Revenue Service (IRS) causes overpayment. The typical investor uses his “dollar cost” as his value, not the FMV used by the IRS. The Internal Revenue Service (IRS), for most tax matters, does not use “dollar cost” as an amount of “value”, the IRS, for taxes, uses the “fair market value” of the asset. taxpayer is using a definition not used by the IRS.
IRS Value (FMV)
The definition used by the IRS is: FMV is the price the property would sell for on the open market. It is the price agreed between a willing buyer and a willing seller, both must act and both have a reasonable knowledge of the relevant facts. (IRS Publication 561)
How to avoid paying excess taxes and fees
Now that the cause of the overpayment is clear, the next question is how can we avoid paying excess taxes and fees? The goal is to comply with IRS regulations and value investment assets at their Fair Market Value, not at their dollar cost. A “Qualified Appraisal” must be prepared by a “Qualified Appraiser” to comply with IRS regulations.
Qualified appraisal by a qualified appraiser
An appraisal report completed, signed and dated by a qualified appraiser (defined below) according to accepted appraisal standards that meets the requirements of Section 1.17A-13 (c) (3) of the Regulations and Notice 2006- 96, 2006-46 IRB902 (available at http://www.irs.gov/irb/2006-46_IRB/ar13.html).
Dollar cost or book value overvalues ”Fair Market Value. Assets in many investment and trust accounts are overvalued for tax and administrative fee purposes. There is no single rule or formula for determining fair value. market of an asset.with the law, and to comply with IRS regulations, a Qualified Appraisal prepared by a Qualified Appraiser is required.