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CHAPTER XXXIV

APPRAISEMENT

§ 284. Authority of the Federal Regulations

The items listed in the inventory should be appraised along the lines established by the law of the state, where that is mandatory. When the statute is not compelling, appraisers and administrators will make no mistake in being guided in their valuations by the federal regulations, which are coming to be generally accepted, except in a few particulars, as more nearly sound than any other single compilation. The suggestions which follow are in accord with Regulations 37 of the Bureau of Internal Revenue, which contain the rules under which the federal examiners act.

These regulations have been only partially confirmed by the courts, and it is entirely probable that when appeals are taken from decisions of revenue officers, the regulations may not be upheld in all respects. At present they form a valuable interpretation and should be consulted by all those who are interested in valuations under either state or federal law. The federal rules require that the appraisers' report shall conform to the local form. (See § 302.)

§ 285. Who Makes the Appraisement

The value of the inventoried articles should be determined through an appraisal by disinterested persons. In most states it is possible to have appraisers selected by the court, and in some states it is required that they be so appointed. Whenever it is possible, such appointment is desirable.

When there is no arrangement for securing the services of

official appraisers, the executor or the administrator is required to value each item as accurately as possible. In many jurisdictions, the probate judge or representative of the state will accept these valuations if no objection is filed and no further appraisal is made. In cases of controversy, the official appraiser or appraisers appointed will examine and report on the values.

The valuation which the appraisers set upon the assets is ordinarily final. But in cases of errors the executor or administrator is allowed for them in his accounts, and in some cases inventory valuations are subject to review by the Court of Probate.1

Small estates may be exempt from tax and from appraisal by motion and affidavit of the executor or the administrator. If, for instance, the exemption for near relatives is $5,000 each and a man's net property goes to his wife and two children, his net estate being $15,000, it is obvious that neither the state nor the federal government has any interest. The judge of probate would have to be satisfied from the affidavit that the assets amounted to no more, and the comptroller or other official representing the state would have to be notified and satisfied as to the truth of the facts alleged.

If a non-resident had been doing business in the state, or had a residence in the state, or for any reason was likely to be held for any tax or to be considered a resident, his executors could ask the probate court of the locality for a waiver as to his estate or any particular assets belonging to his estate that were not liable to taxation. An affidavit should first be filed setting out all the facts, and a waiver might then be had for assets not liable to tax and an appraisal of assets subject to tax, if there were any.

An executor or an administrator should prepare several

1 Baugh and Schmeisser, Theory and Practice of Estate Accounting.

copies of his inventory and valuation. A copy is required for the court of probate; an additional copy will be required for the comptroller or other state authority; two will be needed for the United States authorities; and one should be filed in each county in other states in which the decedent did business, owned real estate, had business interests, and where foreign corporations were located in which he owned stock. It is to be noted that the same original inventory and appraisement answers for every purpose.

§ 286. Appraisement by Official Appraisers

Permanent appraisers are appointed in New York by the state comptroller. From these the surrogate will, on his own motion or petition, designate one to act in any particular case. In some counties the county treasurer is empowered to act as appraiser. In some cases the surrogate himself may act. In Massachusetts, the tax commissioner appraises the property and also assesses the tax. In California, the state comptroller appoints permanent inheritance tax appraisers, and the superior court having jurisdiction of the estate will designate one or more of these to ascertain and report the tax due on the estate. In Connecticut the probate court appoints two or more disinterested persons to appraise the property. In Delaware, the register of wills acts as appraiser. It will be seen that the process of securing appraisers varies widely, and in each state the local procedure must be ascertained and followed.

§ 287. Qualifications of Appraisers

An appraiser should be a man of intelligence and experience. He should have knowledge of the laws of his state relating to trusts, wills, and the course of descent and distribution. He should be an expert in the values of such property as he appraises. He should be able to conduct examinations of

witnesses and to judge as to questions of residence, relationship, etc.

In these days an official appraiser called upon to value the assets of a large estate should have knowledge and experience in matters of law and business, and should be able to render an intelligent report back to the court. He has power to issue subpoenas and examine witnesses. His powers and duties are semijudicial. "They call for the exercise of some judgment, discretion, and knowledge of legal principles. They demand of the incumbent an understanding of statutory provisions and an ability to pass upon complicated questions of law."

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Where expert appraisers are to be employed, care should be taken to see that they are men of recognized competence with respect to the particular class of property involved. order to facilitate the acceptance of the appraisal, appraisers should be employed whose competence is well established.'

§ 288. Notice of Appraisal

Every person interested in the appraisal, among whom should be included all beneficiaries or legatees, is entitled to reasonable notice of the time and place of the appraisal. When the will is probated or when letters of administration are granted, all parties in interest are notified, and the parties entitled to notice of the appraisal would be included in the list then used. The appraiser's report should state that due notice, as prescribed by the local statutes, was given to all persons entitled to notice.

§ 289. Procedure at Appraisals

The evidence presented as to value of property, as to the estate's ownership of particular property, and as to relationship of persons to the decedent, may be in the shape of

2

People ex rel. McKnight v. Glynn, 56 Misc (N. Y.) 35.
Article 19 of Regulations 37.

affidavits or oral. The appraiser may subpoena corporate books when there is no other way to prove the value of stock.

§ 290. Ascertaining Values-General Rules

The transfer tax is computed on the value of the property at the time of death. Generally speaking, the price which can be secured for articles of personal property at a bona fide sale is the figure which should be inserted.

The value at which property included in the gross estate is to be returned for [federal estate] tax purposes is the value at the time of the decedent's death. Neither depreciation nor appreciation in value subsequent to the date of death is considered. The value to be ascertained is the market, or sale, value of the property. The highest price obtainable for the property within a reasonable period of the decedent's death is the value to be included. A sale of the property, however, in order to be accepted as the criterion of value, must be made in such manner as to insure the best price obtainable under existing circumstances.*

The price realized from a sale cannot be used as determining the value for federal estate tax purposes: (1) unless the sale was made as a matter of business, and not merely in order to establish value; (2) unless it was made in absolute good faith, with a view to realizing as high a price as possible; and (3) unless reasonable care and skill were exercised to obtain such high price.

If individual sales of property are better adapted to procure a good price than auction sales, the price obtained at an auction sale will be accepted only after reasonable effort to find individual purchasers has been made."

§ 291. Ascertaining Value of Real Estate

Real estate is not appraised at its tax valuation but at its market value. This is not to be its value at a forced sale. On

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