Question

As sole heir, Dazie receives all of Mary's property (adjusted basis of $10,400,000 and fair market value of $13,820,000). Six months after Mary's death in 2018, the fair market value is $13,835,000.

a. Assuming an estate return is filed, can the executor of Mary's estate elect the alternate valuation date and amount?

b. Dazie's basis for the property is $. ___________

c. Assume instead that the fair market value six months after Mary's death is $13,800,000. Assuming an estate return is filed, can the executor of Mary's estate elect the alternate valuation date and amount?

d. Dazie's basis for the property is $._________

Answer 1

Answer a:

No

Fair market value of Mary's property = $13,820,000. Six months after Mary's death in 2018, the fair market value is = $13,835,000. Fair value has increased on alternate valuation date. The executor of Mary's estate cannot elect the alternate valuation date and amount as the election does not result in reduction in fair value of gross estate.

Answer b:

Dazie's basis for the property is $13,820,000

Dazie's basis for the property is the fair value of the property as at the date of death.

Answer c:

Yes

Executor can elect the alternate date and valuation if following requirements are satisfied:

• The election must result in reduction in fair value of property and
• It must result in reduction in estate tax liability.

If we assume that the fair market value six months after Mary's death is $13,800,000, then there is a reduction in fair value of property on alternate valuation date. Assuming that it also results in reduction in estate tax liability, executor can elect alternate valuation date and amount.

Answer d:

Dazie's basis for the property is $13,800,000

As there is reduction in fair value of property on alternate valuation date, executor can elect alternate valuation date. Dazie's basis is the fair value of property on alternate valuation date and amount.