Does the IRS require photographs for an Estate Appraisal?

ISA members are invited to send in their questions on all things appraising and education to Leon Castner, ISA CAPP. Leon will share his answers on the ISA Now Blog. Please send questions to leoncastner@comcast.net.

Question: I have talked with several of my fellow appraisers about how best to include photographs with an estate appraisal…It seems a waste of trees, my time, and the client’s money to try to print a large numbers of photographs in a report. Can the photographs be put on a disk and appropriately numbered or named so that they reconcile with the items in an appraisal? As you’re well aware, when photographs of appraised items are reduced in size to fit an item description in a report, they frequently become unreadable.

Please give us the definitive answer. What does the IRS require?

Answer: The IRS regulations do not address the issue of photographs in an estate appraisal. They do address the issue in a donation appraisal but state that the taxpayer is responsible for submitting a clear photograph if the item claimed for a deduction is over $20,000.

However, the appraiser is responsible for providing a fair market valuation based on the facts that support it, including sales comparisons with other pieces. Identification is the first part of an appraisal process. Descriptions may be incomplete or inadequate. A good photograph will assist in clearly visualizing the piece. In addition, part of an analysis is certainly the comparison of item being appraised with items that have actually sold. Comparisons without photographs are sometimes difficult. It’s always better to have a photograph of the item and, if warranted, photographs of any comparables.

Often an estate consists of rooms of general household furniture and items of minimal value. It makes no sense to do individual photographs. I would suggest group or room shots. Items having significant value should have individual shots. Those of even higher value might require numerous shots including those of comparables. Use your common sense.

I wish I could give you dollar levels or thresholds, but there are none. One must decide if or how many photographs support the claims. On the other hand, if photographs are not clear or distinct, what point is there to including them?

The ISA Report Writing Standard currently does not require photographs for appraisals. It does require a statement be made about the use of photographs, if applicable. I would suggest that a change in this standard is imminent. I think that every assignment warrants the use of good photographs, unless otherwise specified. It makes no sense in the world of digital photography to skimp or ignore their importance or use.