Estate FMV Dates

The estate's executor can elect to use the Alternative Valuation Date of six months later only when doing so reduces the federal estate tax. That impplies a large enough estate to generate a Form 706 estate tax to begin with.

Unfortunately, the estate will pay no taxes. My question relates to the basis of the beneficiaries. Fabricated examples follows:

Event Date Example 1 Example 2

-------------- --------- --------- --------- Death: July 2009 $ 100,000 $ 80,000 Distribution: Jan 2010 80,000 100,000

Sale: Mar 2010 120,000 120,000

It's the difference a $20,000 and $40,000 gain! Again these are numbers I made up.

Dick

My condolences on your loss.

You can only elect the alternative valuation date if it will lower both the value of the taxable estate and the estate tax. Since the estate tax is zero either way, the alternative date is not available.

I don't see a REQUIREMENT that the election is limited to when the valuation reduces the estate tax.

(However, I agree that selecting a higher valuation defeats the purpose of the election.)

========================================= MODERATOR'S COMMENT: From page 7 of 2008 Intructions to Form 706 "You may not elect alternate valuation unless the election will decrease both the value of the gross estate and the sum (reduced by allowable credits) of the estate and GST taxes payable by reason of the decedent?s death for the property includible in the decedent?s gross estate."

Your citiation is not statute (but is reflective of Section 2032(c)).

Furthermore, reducing the estate tax by itself isn't enough. Reduction of gross estate is also required. Mr. Kamlet's statement was incomplete.

One can have a reduction in tax without a reduction in gross estate - if expenses and deductions to arrive at taxable estate differ under the methods.

One other thing - the election must be taken on the estate tax return, and the return has to be filed no later than one year late (including extensions).

Just in case he doesn't believe you:

IRC §2032(c):

"No election may be made under this section with respect to an estate unless such election will decrease? (1) the value of the gross estate, and (2) the sum of the tax imposed by this chapter and the tax imposed by chapter 13 with respect to property includible in the decedent?s gross estate (reduced by credits allowable against such taxes)."