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Vicki Hood Acct 403 DB2 Reply April 9, 2012

Syed did a great job explaining the significance of the alternative valuation date as defined by the IRS. I printed the section of instructions 706 that pertained to alternative valuation date and follow Syed’s information relatively well. He accurately stated information given by the IRS regarding when it is appropriate to use the alternative valuation date rather than the date of death and the necessary IRS requirements. I did find it interesting that “Instruction 706” did not list the dangers or penalties involved regarding understating property value. Whether it is unintentional or not there can be severe penalties for under evaluating property value. Here are a couple I found from another internet source:

(1) there is a substantial penalty if the property listed on Form 706 is 50% or less than the amount determined to be correct. The penalty is 20% of the underpayment. (2) the fair market value used on the 706 form is the beneficiary's income tax basis for determining gain or loss when the asset is later sold or the limit on cost recovery through depreciation. (FreeAdvice, 1995-2012)

Reference FreeAdvice. (1995-2012). Retrieved from How is the property in my estate valued for federal estate taxes?: ttp://law.freeadvice.com/tax_law/estate_tax_law/estate_property_value.htm