What’s an alternate valuation date?

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The alternate valuation date allows heirs to value estate assets for tax purposes six months after a person’s death, potentially saving taxes if assets have declined in value. The executor can choose between the date of death and alternate valuation date, but all assets must be valued on the chosen date. Restrictions apply.

The alternate valuation date is a legal concept used to determine federal estate taxes. Refers to an option for heirs to value estate assets for tax purposes six months after a person’s death, instead of using the value from the time of the person’s death. This can save taxes, especially if the assets have declined significantly in value.

When someone dies and leaves behind an estate valuable enough to pay federal estate tax, there are a variety of assets that must be valued. These include the balance of bank accounts, investment accounts, and retirement accounts. Other relevant assets include the market value of shares the decedent held individually rather than through a brokerage account. The value of real estate and other property must also be assessed.

Section 2032 of the Internal Revenue Code establishes the rules on how these valuations must be made in reference to a specific date. This section is also formally known as Title 25, Subtitle B, Chapter 11, Subchapter A, Part III. The IRS added the relevant rules during the 1930s in response to the Great Depression. This is because some heirs found themselves in a situation where assets, such as stocks, were falling in value so drastically that when the estate tax was assessed, the assets weren’t even valuable enough to cover the tax. , meaning the heirs ended up worse off financially as a result of the bereavement.

The rules allow the executor of the estate, also known as the personal representative, to choose between using the date of death and the alternate valuation date. The latter is the date six months after the date of death. It can only be selected where the overall tax liability will decrease.

There are some restrictions on the use of the alternative valuation date. One is that it is an all or nothing proposition. This means that if used, all assets must be valued at their value on this date, even those that have increased in value since the date of death. Another restriction is that if any of the assets were sold between the date of death and the alternative valuation date, they must be valued at their sale price, regardless of the date they were sold. Finally, any interest that the assets have accrued during the six months should be included in the assessment amounts.

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