The value of the gross estate may be valued on an alternate valuation date. If a property is distributed, sold, exchanged, or disposed of within six months after the decedent’s death, the property would be valued as of the date of the distribution, sale, exchange, or other disposition.
Suppose the property has not been distributed, sold, exchanged, or otherwise disposed of within six months after the decedent’s death. In that case, the property may be valued as of the date six months after the decedent’s death (when the alternate valuation date is elected).
The election of the alternate valuation date is made by the executor on the federal estate tax return and is irrevocable once it is made. The election is not allowed if the federal estate tax return is filed more than one year after its due date, including extensions.
The estate tax return is normally due nine months after the date of death. All property must be valued as of the alternate valuation date if such an election is made. Property which passes for purposes of the charitable deduction under §2055 or §2106(a) (2), or the marital deduction under §2056, must be adjusted in value as of the date six months after the decedent’s death or the date of sale, exchange or other disposition if the executor elects the alternate valuation date.
The election is not allowed to be made unless the election will accomplish a decrease in the gross estate value and a decrease in the sum of the tax imposed generally. Consider the estate of a husband, which is valued at the date of death at $900,000 and which all passes under the will to his surviving wife (and, thus, no estate tax is due because of the marital deduction).
If the assets in the estate are worth $1,100,000 six months after the date of death, the estate may not elect the alternative valuation date—to receive a step-up in basis for the assets to $1,100,000.
EXAMPLE:
■ At the date of death, in 1999, Zelda’s estate, which passes to her daughter, is valued at $700,000. Securities are valued at $400,000, and real estate is valued at $300,000.
■ Her estate’s executor sells one-half of the securities three months after her death for $235,000.
■ Six months after the death, the real estate is valued at $250,000, and the rest of the securities are valued at $195,000.
■ Assuming no other deductions or credits on the federal estate tax return, the executor may use the date of death values of $700,000 and pay tax on $50,000, or the executor may elect the alternate valuation date which results in the following:
One-half securities on date of sale: $ 235,000
One-halfsecurities six months after death: $ 195,000
Real estate six months after death: $ 250,000
$ 680,000 In electing the alternate valuation date, the estate pays estate tax on $30,000.
