The alternate valuation method is a way to assess the value of a deceased person's estate for estate tax purposes. Instead of using the estate's value at the time of death, this method allows for valuation one year later, which can sometimes result in a lower tax burden. This method is particularly useful for estates that may have fluctuating asset values shortly after death.
This term is primarily used in estate planning and tax law. Executors of estates may choose the alternate valuation method to potentially reduce estate taxes owed by valuing the estate at a later date. This approach is governed by federal law and can be beneficial in managing the financial implications of an estate after a person's passing. Users can often manage the necessary forms and procedures through legal templates available on platforms like US Legal Forms.
Here are a couple of examples of abatement:
(hypothetical example) If a person passes away and their estate includes stocks that were valued at $100,000 at the time of death but drop to $80,000 six months later, the executor may elect to use the alternate valuation method. This could result in lower estate taxes based on the $80,000 valuation.
The primary statute governing the alternate valuation method is found in the Internal Revenue Code, specifically 26 USCS § 2032. This law outlines the conditions under which the alternate valuation method may be elected and the implications of doing so.
| Term | Definition | Key Difference |
|---|---|---|
| Fair Market Value | The price at which property would sell in an open market. | Alternate valuation method allows for a different valuation date, potentially impacting tax obligations. |
| Step-Up in Basis | The adjustment of the value of an inherited asset to its market value at the time of the decedent's death. | Step-up in basis affects capital gains tax, while alternate valuation impacts estate tax valuation. |
If you are an executor considering the alternate valuation method, evaluate the potential tax implications carefully. You may want to consult with a tax professional or estate attorney to understand the best course of action. Additionally, you can explore US Legal Forms for templates that can assist you in managing the necessary documentation.
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It is a method for valuing a deceased person's estate for tax purposes, allowing for a valuation date one year after death.