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IRS Drafts Guidance On Estate Valuation Alternative

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The Internal Revenue Service is writing a rule about how executors should calculate the value of taxable estates.

The IRS has proposed a draft of the rule, “Gross Estate; Election to Value on Alternate Valuation Date,” today in the Federal Register.

The draft regulation would affect estates big enough to be subject to the federal estate tax.

A federal estate tax law in effect since 1926 permits an executor to value an estate by looking at the price of assets sold or transferred through other means at any time during a 6-month period following an individual’s death, and then estimating the value that any remaining assets hold at the end of the 6-month period, IRS officials write in a notice of proposed rulemaking.

In 1935, in response to the 1929 stock market crash, Congress enacted a law that also permits executors to use the value that any remaining assets in an estate hold at the end of the 1-year period following an individual’s death.

Some court cases have focused on the kinds of changes in value that executors can consider when valuing assets at the end of the 1-year period.

The proposed regulations would make it clear that executors can use the alternative 1-year valuation method to “estates that experience a reduction the value of the gross estate following the date of the decedent’s death due to market conditions, but not due to other post-death events,” officials write.

Executors could not consider voluntary acts of trustees when using the alternate valuation method, officials write.

If the regulations are approved, most would apply to the estates of individuals dying on or after April 25, 2008.

Comments on the proposed regulations are due July 24.


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