Which statement about alternate valuation of a decedent's estate is true?

Which statement about alternate valuation of a decedent's estate is true?

• A. When elected, alternate valuation applies to all assets in the gross estate, the personal representative may not value some assets at date of death and others at alternate valuation date.
• B. Alternate valuation may be elected only if it results in a higher value for the gross estate and results in higher estate taxes.
• C. When elected, alternate valuation does not apply to any assets sold within six months following date of death, they are valued at date of death value.
• D. When elected, the alternate value is used for estate tax purposes but the cost basis of the assets is still the date of death value for capital gain tax purposes.

Answer: (B)

Alternate valuation is the option to value the decedent’s gross estate six months after death instead of at the date of death, if that reduces the estate tax. This election applies to the entire gross estate and is irrevocable, so you don’t pick and choose per asset. An asset sold within the six months after death is valued at the date-of-death value for estate tax purposes, not the six-month value. The idea behind the election is to lower the taxable estate, not raise taxes. So a statement that it may be elected only if it increases the gross estate and increases taxes isn’t correct. For tax reporting, the alternate date affects the estate tax calculation, while the cost basis of inherited assets for capital gains purposes typically remains the date-of-death value.

Alternate valuation is the option to value the decedent’s gross estate six months after death instead of at the date of death, if that reduces the estate tax. This election applies to the entire gross estate and is irrevocable, so you don’t pick and choose per asset. An asset sold within the six months after death is valued at the date-of-death value for estate tax purposes, not the six-month value.

The idea behind the election is to lower the taxable estate, not raise taxes. So a statement that it may be elected only if it increases the gross estate and increases taxes isn’t correct. For tax reporting, the alternate date affects the estate tax calculation, while the cost basis of inherited assets for capital gains purposes typically remains the date-of-death value.