Alternative Valuation Date

The Alternative Valuation Date is a provision within the Internal Revenue Code that allows the executor of an estate to elect an alternative date for valuing certain estate assets for federal estate tax purposes. This date can be up to six months after the date of the decedent’s death.

The primary purpose of the Alternative Valuation Date is to potentially reduce the overall estate tax liability. If the value of the estate assets has declined during the six-month period following the date of death, the executor may choose the Alternative Valuation Date to reflect this lower valuation, thereby decreasing the taxable estate.

For example, if an individual passes away on January 1 and the fair market value of their assets is $1 million at that time, but drops to $900,000 by June 30, the executor can elect the Alternative Valuation Date of June 30 to value the estate. This could lead to a reduction in the federal estate taxes owed.

It is important to note that once the Alternative Valuation Date is elected, all assets in the estate must be valued as of that date, and this election must be made on the estate tax return (Form 706) filed with the IRS. Additionally, this election is irrevocable once made.