Jim inherits stock from his brother, who died in March of 2015, when the propert

Question

Jim inherits stock from his brother, who died in March of 2015, when the property had a $6.9 million FMV. This is the only property included in his brothers gross estate and there is a taxable estate. The FMV of the property as of the alternate valuation date was $6.7 million.

a) Why might the executor of the brothers estate elect to use the alternate valuation date to value the property?

b) Why might Jim prefer the executor to use FMV at time of death to value the property?

c) If the marginal estate tax rate is 40% and Jim's marginal income tax rate is 25%, which valueshould the executor use?

Explanation / Answer

a) The executor of the brothers estate elect to use the alternate valuation date to value the property because of the following reasons:

He wants to sell the property, as if the property is sold, exchanged or disposed of within 6 months after decendent death such property should be valued at the date of sale, exchange or dispsal. Or he might chose the alternate valuation date to value a property because the value of the property might have come down due to depreciation of the property for the time till alternate valuation date.

b) Jim prefer the executor to use FMV at time of death to value the property as he can take the deduction in the income tax if the property have not elected to use the atlernate valuation date to value the property.

c) Jim should use the marginal income tax rate of 25% as the rule says that the executor uses the rate of the benificiary in case the property is inherited.

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