a. What is Bob's basis in the warehouse and in the land?
b. What would be Bob's basis in the warehouse and in the land if the appraised value of the warehouse was $50,000 and the appraised value of the land was $125,000?
c. Which appraisal would Bob likely prefer?
Bob's Basis Warehouse: $75,000 Land: $100,000
Bob's Basis Warehouse: $50,000 Land: $125,000
Bob would likely prefer the appraisal from part (a), because the appraisal allows him to allocate more basis to the warehouse, which is depreciable.
Understanding Appraisal
Appraisal is the process of determining the value of real estate, antiques, or collectibles. Real estate transactions are often supported by appraisals because each property is unique.
Historically, valuation practices have recognized three main methods:
1. Comparison approach
2. Income approach
3. Cost approach
A qualified appraiser prepares a report based on face-to-face inspections, recent sales of similar properties, current market trends, and home details such as size, condition, floor plan, and amenities.
The purpose of the evaluation is to state the reasons and scope of the evaluation order. It involves estimating defined values for property division, performing analysis, or consulting work related to property decisions.