The alternate valuation date is a date that occurs six months after a person passes away. When an individual dies, their property can be evaluated either on the date of their death or on the alternate valuation date. This is significant for tax purposes as it determines the property’s value and the amount of tax that must be paid. Basis refers to the value assigned to a person’s investment in property and is utilised to calculate the gain or loss from transferring the property. Adjusted basis is the basis that is increased by capital improvements and decreased by depreciation deductions. Stepped-up basis is the basis of property that is inherited and is equal to the fair market value of the property on the date of the decedent’s death or the alternate valuation date.
The alternate valuation date, which occurs six months after a person’s death, is a term in tax law. It allows the estate to decide whether to appraise the deceased person’s property as of the date of their death or as of the alternate valuation date. For instance, if someone passes away on January 1st, their estate can choose to value their property as of that date or as of the alternate valuation date, which would be July 1st. This term holds significance for tax purposes as it impacts the basis of the property. Basis refers to the value assigned to a taxpayer’s investment in property and is utilised to calculate gain or loss from a property transfer. The basis can be adjusted through capital improvements and depreciation deductions. In the case of property transferred by inheritance, the stepped-up basis is determined by the fair market value of the property on the date of the decedent’s death or the alternate valuation date, depending on the choice made by the estate. For example, if someone inherits a house from their grandmother, the stepped-up basis would be the fair market value of the house on the date of their grandmother’s death or the alternate valuation date, whichever is selected by the estate. All in all, the alternate valuation date is a crucial factor for estates when determining the value of property for tax purposes.
The Alternate Valuation Date is an option provided by the IRS for valuing assets of a deceased person’s estate for estate tax purposes. It allows the executor of the estate to choose a date six months after the date of death as the valuation date.
You should consider using the Alternate Valuation Date if the fair market value of the assets in the estate has declined significantly since the date of death. This can potentially reduce the estate tax liability.
No, the Alternate Valuation Date can only be used for assets that are included in the decedent’s gross estate for estate tax purposes. Certain assets, such as those passing directly to a surviving spouse or assets with a readily ascertainable value, are excluded.
To elect the Alternate Valuation Date, you must indicate your choice on the estate tax return (Form 706) and provide the necessary documentation to support the valuation of the assets as of the chosen date.
Yes, there are certain limitations. For example, if the estate tax return is filed late, the option to use the Alternate Valuation Date is generally lost. Additionally, if the estate qualifies for a stepped-up basis, the basis of the assets will be determined as of the date of death, not the Alternate Valuation Date.
No, once you have elected to use the Alternate Valuation Date, it is generally irrevocable. Therefore, it is crucial to carefully consider the potential benefits and drawbacks before making the election.
By using the Alternate Valuation Date, the estate tax liability may be reduced if the fair market value of the assets has declined. This can result in lower estate taxes being owed by the estate.
Yes, in cases where the fair market value of the assets has increased significantly since the date of death, using the Alternate Valuation Date may not be advantageous. It is important to consult with a tax professional to determine the best approach for your specific situation.
Yes, the IRS has the authority to challenge the valuation of assets on the Alternate Valuation Date if they believe it is not supported by adequate documentation or if they suspect any fraudulent activity. It is essential to maintain proper records and documentation to substantiate the valuations.
The availability of the Alternate Valuation Date for state estate tax purposes varies depending on the state. Some states conform to the federal tax laws, while others have their own rules and regulations. It is important to consult with a local attorney or tax advisor to understand the specific rules in your state.
This site contains general legal information but does not constitute professional legal advice for your particular situation. Persuing this glossary does not create an attorney-client or legal adviser relationship. If you have specific questions, please consult a qualified attorney licensed in your jurisdiction.
This glossary post was last updated: 17th April 2024.
To help you cite our definitions in your bibliography, here is the proper citation layout for the three major formatting styles, with all of the relevant information filled in.
- Page URL:https://dlssolicitors.com/define/alternate-valuation-date/
- Modern Language Association (MLA):Alternate Valuation Date. dlssolicitors.com. DLS Solicitors. May 09 2024 https://dlssolicitors.com/define/alternate-valuation-date/.
- Chicago Manual of Style (CMS):Alternate Valuation Date. dlssolicitors.com. DLS Solicitors. https://dlssolicitors.com/define/alternate-valuation-date/ (accessed: May 09 2024).
- American Psychological Association (APA):Alternate Valuation Date. dlssolicitors.com. Retrieved May 09 2024, from dlssolicitors.com website: https://dlssolicitors.com/define/alternate-valuation-date/
Our team of professionals are based in Alderley Edge, Cheshire. We offer clear, specialist legal advice in all matters relating to Family Law, Wills, Trusts, Probate, Lasting Power of Attorney and Court of Protection.
All author posts