FORESTRY UPDATE by Gary Allen Burns 3-9

For inherited property, it may be useful to postpone a real estate appraisal until six months after the date of death. For federal estate taxes, the value of the gross estate is usually on the date of death. However, an alternative date of six months after the date of death may be used if the property is not sold, distributed or disposed of within those six months. If the property is in fact sold, distributed or disposed of within those six months, the value is determined at that date.

The alternative valuation method may reduce the estate taxes if the gross estate depreciates during the six months. However, in this case, the recipient would receive the property as a “step-up basis”, and the property value would be lower than at the time of death. This could be the downside. If the recipient sells the property later, there could be a greater income tax burden. The alternative valuation method must be made within one year after the due date of the federal estate tax return including extensions. Estates that do not owe any federal estate taxes or generation-skipping tax may not use this method. Consulting an experienced tax accountant or an estate lawyer is necessary to explain the applicable options and to ensure that you limit your estate tax liability.