How do I determine the Fair Market Value for a property I inherited in a foreign country to file form 3520
-The foreign gov't will not give us the appraisal report as it is against their policy and so should I hire my own appraiser? Or can I instead use a relative who is a reputable real estate agent in that area?
And what documents does the IRS accept as proof of the FMV?
-What if my determined FMV doesn't match the foreign government's appraisal value? Does it matter? Will the IRS investigate this or anyhting.
I'm not sure how to handle this but want to ensure I am doing everything properly. Thank you!
2 attorney answers
If you are over the $100,000 threshhold for filing Form 3520, you should hire a tax attorney in the US to assist with this. Reason is that this may not be the only form you need to file depending on how the transaction was structured and offshore assets is one area where the IRS is very strict with its enforcement efforts (and very successful at collection).
Depending on the circumstances, you may need a private appraisal. My experience has been that different countries have different standards. Some of this has to do with how real property is held. In some jurisdictions, private persons own the building but have a long-term interest in the land retained by the state.
As you see, this gets complicated so you would be well advised to have international tax counsel to help with this.
Information provided in this forum is for generalized discussion proposes and should not be considered legal advice. NO ATTORNEY-CLIENT RELATIONSHIP IS CREATED THROUGH THIS INTERACTION. While claims or statements made in communications on this forum are believed to be reasonably accurate at the time they are made, no warranty is made or implied as to their accuracy or completeness and such statements may not be relied upon, may not be used for tax or other filings, and may not be relied upon for relief from any interest or penalties.
No opinion is being rendered regarding what forms are required to be filed. The opinion is limited strictly to determining the value of the property.
My recommendation would be that you hire a qualified appraiser and obtain a written report of the value of the property. This should be sufficient documentation for the value reported to the IRS. Due to the appearance of bias I personally would not use a family member as it can be implied that a family member would make a report that would benefit you. If you want to be overly cautious you may want to retain the documentation generated in your efforts to obtain the valuation information from the foreign government. Truthfully if you have a certified appraisal report, I doubt the IRS will contact the foreign government to see if the values matched. If the IRS wanted to establish a different value it would probably get its own appraiser.
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