How does alternate valuation work for assets sold within six months of death?
Key takeaway
Alternate valuation assigns an estate tax return asset the value from its sale or distribution date when that transaction occurs within the six-month period after death. Property still held is valued six months after death. The IRS allows the election only when it decreases both the specified property value and net tax due. The rules concern owners of businesses, real estate and private investments.
How a sale or distribution sets value
A sale or distribution within the six-month period fixes that asset's alternate value on the transaction date.
Property still held is valued six months after death under the alternate valuation rules described for estate tax return assets. The sale or distribution date applies to the transferred asset, while the six-month valuation date applies to assets not sold or distributed within that period.
The election has two conditions
The IRS makes alternate valuation unavailable unless it decreases both the specified property value and the net tax due.
A decrease in the value of specified property alone does not satisfy the IRS condition. The net tax due must decrease as well for alternate valuation to be available.
The election cannot be reversed
An alternate valuation election is irrevocable once made.
The IRS describes the election as irrevocable after it is made. The alternate valuation rule also applies to the assets included in the estate tax return, with sale or distribution dates fixing the values of affected assets.
Minnesota estates without a federal filing requirement
Minnesota estates with no federal filing requirement use date-of-death values because alternate valuation is unavailable unless elected federally.
Minnesota's guidance ties alternate valuation to a federal election. Without a federal filing requirement, the estate uses date-of-death values under the state guidance.