I'm trying to determine all of the different ways that tree appraisals can be used. I think I understand how they can be useful for determining casualty losses as a tax deduction with the IRS and how they can be used in litigation cases. Apparently, most insurance companies (if not all) only allow $500 per tree. I realize that trees also affect real property market values. Knowing this, can casualty losses be used to reduce governmental property tax appraisals? Are there other uses for tree appraisals?

Also, has anyone found it useful to work in conjunction with a real estate appraiser for determining property values or for evaluating the effect of casualty losses on property values? For IRS purposes, it seems like it would be a good idea to work with a real estate appraiser or become one yourself when determining the percentage of value that trees add to a property. Thanks in advance for your help.

Reply to post by Todd Watson, on July 20, 2000 at 21:24:20:

Todd,

I think IRS Casualty losses are the most common potential use for the "typical" arborist... who works with many homeowner clients. Given both the loss rules and "measure of damage" rules there are fewer and fewer cases where it's really worth the exercise. While you might use a tree appraisal and get away with it if the return is not scrutinized, according to the regs only real estate value before and after the casualty is acceptable. (Cost of restoration might be acceptable but only if actually done in the year of loss... so if it's actually done you have actual receipts so what do you need an appraisal for?) I've been involved in cases where a real estate appraiser brought me in to help... the real estate appraiser is really the lead expert here.

The loss rules also limit the practical use in insurance cases ut that is a potential use.

Litigation support is an important use, maybe one of the most challenging and finincially rewarding for the qualified consultant.

Those are the uses you know about. There are others. Generally, I'd describe them as "management decision tools." How much is our urban forest worth and how much should we spend on maintenence and replacement? How much is that tree in the Town square worth and should we repair it or remove it and plant a new one? When I build these houses how many trees should I leave and how much should I spend to protect them.... what will they add to the sales price of the house? This is potentially a much larger market than "damage" appraisals and the 9th Edition Guide suggests we should be looking at it.

Working with a real estate appriaser can be very useful (as above in IRS case). I'd guess that a documented reduction in property value might serve as a basis for reduction in property tax assessment but it would depend on a) the %age of loss and potential savings in tax (is it worthe the effort), b) the relationship of assessments in the jurisdiction to true market value (TMV, is the assessment already way below TMV? is the proposed reduction in TMV significant enough not to be lost in the margin of error in the ratio of assessment to TMV? Is the jurisdiction even trying to keep pace with TMV?) and c) will law or regs allow it?

Remember the flip side, theoretically if you reduce basis you increase taxable gain on sale. How much paper work to you want to create and keep track of?

I think taking some RE appraisal courses is an excellent idea for any tree appraiser. There available everywhere since all the states require licensing and continuing education (CE)... try local colleges or boards of Realtors. But check into those licensing requirements for education and experience hours to get licensed and CE hours to stay licensed. There may be no payback in tree apprasials to get and keep that RE license. Even if you are licensed you have to stay current on market activity in any market you work in. You have to have access to current transaction data (which is freely available in public record) and the data have to be carefully screened by comparable neighborhood, square footage of house, # of bedrooms, lot size, etc., etc. (which appraisers and Realtors typically do constantly and amortize over their complete practice... tough for you to do for a few cases a year).