The value at which estate property is included in the gross estate for Federal Estate Tax purposes.

The value at which estate property is included in the gross estate for Federal Estate Tax purposes.

• A. Book Value
• B. Fair Market Value
• C. Tax Basis
• D. Assessed Value

Answer: (B)

The key idea here is how assets are valued for federal estate tax purposes. When determining what goes into the gross estate, each item of property is valued at its Fair Market Value—the price it would bring in an orderly, arm’s-length sale between a willing buyer and a willing seller at the date of death. This ensures the estate tax reflects the actual market value of the decedent’s assets at that moment. FMV is different from other values you might see. Book value is the accounting carrying amount on the books, which often understates or overstates current value. Tax basis is the amount used to calculate gain or loss for income tax purposes when property is sold, not the value used for estate tax. Assessed value is used for property taxes and can be quite different from market value. For estate tax, what matters is FMV as of death (often the date of death, or an alternate valuation date if elected). That’s why Fair Market Value is the correct choice.

The key idea here is how assets are valued for federal estate tax purposes. When determining what goes into the gross estate, each item of property is valued at its Fair Market Value—the price it would bring in an orderly, arm’s-length sale between a willing buyer and a willing seller at the date of death. This ensures the estate tax reflects the actual market value of the decedent’s assets at that moment.

FMV is different from other values you might see. Book value is the accounting carrying amount on the books, which often understates or overstates current value. Tax basis is the amount used to calculate gain or loss for income tax purposes when property is sold, not the value used for estate tax. Assessed value is used for property taxes and can be quite different from market value. For estate tax, what matters is FMV as of death (often the date of death, or an alternate valuation date if elected). That’s why Fair Market Value is the correct choice.