IRS Proposes Alternate Estate Valuation Dates

By Ron Soluri Jr., CPA, CVA on October, 2 2012
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Ron Soluri Jr., CPA, CVA


Adjustments in Valuation Dates No Longer Straightforward

Author: Ron Soluri, Jr.

The IRS has proposed regulations on the election of alternate valuation dates for estates. Currently, it’s unclear whether they will be implemented, but the proposed regs could significantly affect the availability of alternate valuation dates when the value of an estate decreases after death.
According to Internal Revenue Code Section 2032(a), executors can elect to value an estate six months after the date of death. But any estate property that’s distributed, sold, exchanged or otherwise disposed of during the six months is valued as of the date of disposition. What’s more, any interest whose value changes due merely to the lapse of time is valued as of the date of death. Adjustments are allowed for any difference in value attributable to factors other than the lapse of time.

The proposed regulations include two exceptions to Sec. 2032(a)’s rule:

  1. Transactions in which an interest in a corporation, partnership or other entity includible in the decedent’s gross estate is exchanged for a different interest in the same entity or an acquiring entity, such as a reorganization, recapitalization or merger, and
  2. When the estate receives a distribution from a business entity, bank account or retirement trust and an interest in that entity is includible in the decedent’s gross estate. An estate may be able to use the six-month date to value, respectively, the interest received or the property held in the estate if certain conditions are met.

In its proposal, the IRS also introduces an aggregation rule for calculating the fair market value (FMV) of each portion of property that’s disposed of during the alternate valuation period but that remains in the gross estate on the six-month date. And it proposes a special rule for determining the portion of a trust that can be included in the gross estate as of the alternate valuation date by reason of a retained interest.

Further, the proposal clarifies when property is deemed to be disposed of where its title passes by contract or operation of law. It also lists the types of factors, including economic or market conditions during the alternate valuation period, that affect the FMV of property on the alternate valuation date.

business interruptionThe proposal’s future is yet uncertain. But your financial advisor can keep you abreast of any developments likely to affect your clients. You can read more about the proposal here.

For any questions regarding this proposal or other estate management issues, contact us here or give us a call at 716.847.2651.

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