Assessor vs FMV

Today TaxMama hears from Tim in California with this issue, “Can we use fair market value (FMV) to determine land valuation, leaving the rest of the purchase price as the value of the new rental house, for depreciation purposes? The assessor’s ratio usually isn’t in our best interest.”

Dear Tim,

True. In California, the appraisers tend to show a ratio of close to 50/50 when left to their own devices.

So sure, you can use the fair market value (FMV).

The only question is – where do you get the FMV for your particular piece of land?

There’s a lot of money at stake – over a long period of time. Do not simply print off data from the Internet.

The best place is from the appraiser’s report. Since this is a new purchase, you’ve recently gotten an appraisal so the lender could give you a mortgage. Always ask for a copy of this at the time you arrange for the appraiser’s appointment – or when you work on the loan application with the lender. If you don’t, you will have to fight to get a copy after the escrow is settled. I have no idea why this is the case. After all, you paid for it – look at your HUD-1 escrow summary.

So, hold firm and get a copy of the appraisal. It will have the correct land and building values. A professional appraisal is the best way to establish values for depreciation purposes.

And remember, you can find answers to all kinds of questions about depreciation and basis and other tax issues, free. Where? Where else? At TaxMama.com

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