Ask an Instructor: Effective Dates in Light of COVID-19

Ask an Instructor: Effective Dates in Light of COVID-19

Monday, April 13, 2020 in Ask an Instructor

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QuestionAn estate attorney is asking me to provide a fair market value appraisal for the intended use of filing IRS estate tax forms with the date of death as the effective date. Now that COVID-19 has affected the marketplace, the attorney is considering using the alternate date of death as the effective date. The attorney doesn’t want to pay for a new appraisal and has asked me instead to write a letter stating if the values have changed by a certain percentage or if they have remained the same. Can I do that? 


I am finding that many of my estate clients are considering the tax implications of using the date of death or the alternate date of death (six months after the date of death) for the effective date of the appraisal. If the estate elects to use the alternate date of death, then this effective date is used for all of the asset classes in the estate – real property, personal property, stocks, etc. Typically, the alternate date of death is used by an estate when there is a significant drop in value for the stocks and/or real property. The choice often has nothing to do with personal property. However, there are some instances where the personal property in an estate might also have a significant fluctuation in value during that six month period. For example, coins, jewelry, and other items where the property’s value may depend upon the spot price of a precious metal (gold, platinum, silver, etc.) may be more likely to fluctuate. Sometimes there may be a difference and sometimes there may not. Your job as appraiser is to know what the market is doing at all times the best you can, even now.

I understand why the attorney is trying to save money by not paying for a second appraisal. That being said, it is not appropriate for an appraiser to “just write a letter.” The second appraisal is a new (and separate) assignment because there is a different effective date, new market analysis, and potentially new comparables (Also don’t forget to edit your USPAP Certification Statement as you have previously appraised these items within the last three years). That said, the inspection does not need to take place again, and the time to write descriptions and insert images is reduced or eliminated because you can cut-and-paste. Thus, the time to produce this second appraisal will likely be less than that required for the original report. I have found that explaining my time involved in the second report is most often understood by the attorney and allays the potential fear of a fee that is double your original quote. Producing a USPAP-compliant second appraisal report will also help the estate should it be audited and the appraisal reviewed by the IRS. 


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