Appraisal guides for property owners and advisors.

When real estate is donated, transferred, or reported for federal tax purposes, the IRS requires a “qualified appraisal” prepared by a “qualified appraiser.” These are statutory terms with specific meanings under IRC §170(f)(11) and Treasury Regulations §1.170A-17. USPAP compliance is necessary but not sufficient; an appraisal must also meet IRS content and timing requirements to support a deduction or filing.

When an appraisal is required

• Charitable contributions of real property over $5,000. A qualified appraisal must be attached to Form 8283. Contributions over $500,000 require the full appraisal attached to the return.
• Conservation easement donations. Required regardless of value.
• Estate and gift tax filings. Real property must be reported at fair market value as of the valuation date. An appraisal is the standard method of support for IRS and New York State filings.
• Basis step-up at death (IRC §1014).A beneficiary’s basis in inherited property is stepped up to fair market value on the date of death. An appraisal establishes and protects that basis.

Common reasons the IRS challenges appraisals

Incorrect effective date; comparable sales that are not genuinely comparable; a methodology inappropriate for the property type; inadequate description of the property or appraiser qualifications; and opinions that state a value without demonstrating how it was reached. Substantial misstatements may trigger penalties under IRC §6662.

New York municipalities assess real property and use those assessments to apportion the local tax levy. If an assessment overstates market value, the owner pays more than their share. The process for challenging it is a grievance; the judicial track for commercial properties is a tax certiorari proceeding under Article 7 of the Real Property Tax Law.

The grievance calendar

• Tentative assessment roll. Published May 1 in most municipalities.
• Grievance Day. Fourth Tuesday in May for most localities; third Tuesday in June for Westchester towns. File Form RP-524 on or before Grievance Day.
• Small Claims Assessment Review (SCAR). Available to owners of one- to three-family homes and qualifying vacant land. Filing fee: $30.
• Article 7 proceeding. The judicial track for commercial properties. Commenced in Supreme Court within 30 days of the final assessment roll filing.

The role of an appraisal

An appraisal is the evidence, not the argument. A formal appraisal by a certified general appraiser, supported by comparable sales and income analysis, is the most credible form of that evidence and is functionally required before an Article 7 proceeding. At the administrative stage, it provides the basis for negotiation with the assessor.

Unsolicited letters offering contingency-basis grievance services are sent in volume without property-specific analysis. A credible review starts with your actual numbers: assessed value, equalization rate, income data, and comparable sales.

A conservation easement is a permanent restriction on the development and use of land, donated by a landowner to a qualified land trust or government entity. The donor may claim a charitable deduction equal to the value of the restriction, which must be established by a qualified appraisal under IRC §170(h) and Treasury Regulation §1.170A-14.

The before-and-after method

The deductible value equals the fair market value of the property beforethe easement, minus its value after. This requires two separate appraisals of the same parcel. The before value reflects highest and best use without restriction; the after value reflects the parcel with development rights removed. The differential is larger when the before value reflects meaningful development potential. Properties with limited development potential to begin with may not support a meaningful deduction.

Process and common pitfalls

Engage a qualified land trust first. The land trust confirms the property qualifies under IRC §170(h), drafts the easement, and accepts the donation. The appraiser is brought in after the easement is defined. Appraisals in this area receive heightened IRS scrutiny, particularly syndicated transactions. Common failures include a before value based on speculative development assumptions, comparable sales that are not genuinely comparable, and inadequate baseline documentation.