This Daily Tax Tip Spotify Podcast and/or WordPress Blog Post is in response to requests for general information on the Valuation of Property for Federal Estate Tax purposes.
We understand that you are requesting this information in your capacity as the Executor of an Estate.
Generally, the value of all property included in a decedent’s gross estate is the property’s Fair Market Value on the Date of the Decedent’s Death.
However, as executor of the estate, you may elect to value the property as of an Alternate Valuation Date if that election will decrease both:
(1) the value of the Gross Estate, and
(2) the sum (reduced by allowable credits) of the Estate and Generation Skipping Transfer (GST) Taxes payable by reason of the decedent’s death.
The election applies to all property included in the decedent’s gross estate. If you elect the Alternate Valuation Method, the property included in the decedent’s gross estate on the date of his or her death is valued as of whichever of the following dates applies:
(1) Any property distributed, sold, exchanged, or otherwise disposed of within six months after the Decedent’s Death is valued as of the date on which it is first distributed, sold, exchanged, or otherwise disposed of.
(2) Any property not distributed, sold, exchanged, or otherwise disposed of within Six Months After the Decedent’s Death is valued as of the date six months after the date of the decedent’s death.
(3) Any property, interest, or Estate that is Affected by Mere Lapse of Time is valued as of the date of the decedent’s death, but adjusted for any difference in its value not due to mere lapse of time as of the date six months after the decedent’s death, or as of the date of its distribution, sale, exchange, or other disposition, whichever date first occurs.
You elect the alternate valuation on Form 706, United States Estate (and Generation-Skipping Transfer) Tax Return. You may make the election even on a late-filed Form 706, provided it is not filed later than one year after the due date (including extensions actually granted). The IRS will not grant a request for an extension of time to make the election unless the estate tax return is filed no later than one year after the due date of the return (including extensions of time actually granted).
If, based on the estate tax return you file for the estate, use of the alternate valuation method would not result in a decrease in both the value of the gross estate and the sum (reduced by allowable credits) of the estate tax and the generation-skipping transfer tax liability, you may nevertheless make a “Protective” Election to use the Alternate Valuation Method. That way, if it is later determined that such a decrease in value and Estate Tax would occur, you will have reserved the opportunity to use the alternate valuation method.
Finally, as the executor of an estate, if you are required to file Form 706 or Form 706-NA, you are also required to file Form 8971, Information Regarding Beneficiaries Acquiring Property From a Decedent, with attached Schedule(s) A with the IRS and to provide each beneficiary listed on the Form 8971 with that beneficiary’s Schedule A. Form 8971 isn’t required when:
(1) the Gross Estate plus Adjusted Taxable Gifts is less than the basic exclusion amount;
(2) estate tax related forms (for example, Forms 706-QDT, 706-CE, and 706-GS(D), other than those mentioned above, are filed;
(3) the estate tax return is filed solely to make an allocation or Election Respecting the Generation Skipping Transfer Tax; or
(4) the estate tax return is filed solely to Elect Portability of the Deceased Spousal Exclusion amount.
Please call me at your convenience so that we can discuss your Responsibilities as Executor or Administrator with respect to valuing estate property for federal estate tax purposes.
Please contact the office of Don Fitch Accountancy at (760)567-3110 or Email Don.Fitch@CPA.com if you have any questions or would like additional information.
DON FITCH, CPA
74478 Highway 111 #3
Palm Desert, CA 92260
Toll Free: (877)CPA-Help or (877)272-4357
P.S. My firm is based upon referrals. Please feel free to refer my firm to anyone you know that is looking for a new CPA and/or tax preparer. Thank you in advance.
(Updated 06262021-1 321-110)