Federal Estate Tax
Federal Estate Tax Return Form 706 details the assets and liabilities (at fair market value) held by the Estate at the date of death or at the “alternate valuation date”, six months thereafter. If among the Estate's assets are interests in a closely held business or partnership, those interests must be valued by an independent business appraiser. Fair market value (as defined by IRC Revenue Ruling 59-60: The price at which property (e.g. security) would change hands between a willing buyer and a willing seller when the former is not under any compulsion to buy and the latter is not under any compulsion to sell, both parties having reasonable knowledge of relevant facts) takes into consideration the fundamental characteristics of the business as well as the particular characteristics of the interests held, i.e. degree of control (or lack thereof) enjoyed by the owner of the interest and the degree of marketability and or liquidity (or lack thereof) applicable to the interest held.
What to Expect
The Personal Representative(s) of the Estate will require a thorough appraisal that is both reasonable in its conclusions and defensible against challenge from the IRS. Our business valuation work product has stood up well to IRS review and challenge.
Subject to certain thresholds, the Form 706 must be filed with the Internal Revenue Service within nine months of a person’s death, unless extended.