What is the alternate valuation date, and when can it be used?

A second valuation date, six months later

Normally, an estate is valued on the date of death. Section 2032 gives the executor one alternative: value the gross estate as of six months after death.

The idea is fairness. If someone dies right before a market slide, the estate could owe tax on values that evaporated before anyone could sell. The alternate valuation date lets the estate use the later, lower number if it qualifies.

It matters for heirs, too. Under section 1014, inherited property generally takes a basis equal to its value on the date of death, or, if the executor elects under section 2032, its value on the applicable alternate date. One election changes both the estate tax value and the heirs' starting point for future gains.

This is general information. Tax treatment depends on the facts, so confirm with a CPA or tax attorney before making the election.

The rules, in plain English

• Six months after death. Property still held at the six-month mark is valued as of the date six months after death.
• Sold or distributed first? Use that date. Property distributed, sold, exchanged or otherwise disposed of within the six months is valued as of the date it was disposed of.
• It has to lower both numbers. No election is allowed unless it decreases both the value of the gross estate and the combined estate and generation-skipping transfer tax, after credits.
• It is all or nothing. The Form 706 instructions say alternate valuation cannot be applied to only part of the property.
• It is made on the return and cannot be undone. Section 2032 says the election, once made, is irrevocable.
• There is a late-filing limit. No election may be made if the return is filed more than one year after its due date, including extensions.

That second rule catches people. If the house sells four months after death, the house is valued on its sale date, not at six months.

Why most estates cannot use it

Look again at the third rule. The election must decrease the estate tax. If the estate owes no estate tax in the first place, there is nothing to decrease, so the election is not available.

That shuts the door on a common wish: "Can we use the six-month value to get a higher basis because the market went up?" No. The rule only works in one direction. It exists to lower tax on a taxable estate, not to raise the basis for heirs. Picking the friendlier date after the fact is not on the menu.

Families sometimes discover this the way you discover a parking ticket: after they already planned around not getting one.

It also helps to know what the election is not. It is not a way to pick the better of two appraisals, and it is not a way to value the house on one date and everything else on another. It is one decision for the whole estate, made on the return, with the CPA running the numbers.

Where the appraisal comes in

To decide whether the election helps, the CPA has to compare two values. That means real estate often needs an appraisal as of the date of death and another as of the alternate date, or the disposition date if the property was sold or distributed first.

Both are retrospective appraisals by the time anyone orders them. Each one has to reflect the market on its own date, using sales and trends from that time. A six-month gap can be a different market. In a fast-moving period, I do not want to smear those two dates together with a long average. I want to measure what prices were doing around each date with the most recent data that date supports.

Condition matters too. If the roof was replaced in month three, the date-of-death value reflects the old roof. The six-month value has to reflect what was there at six months. That is why photos and dated records from the whole period are gold.

What to do as an executor

1. Ask your CPA early whether the estate is taxable. If it is not, the election is off the table.
2. If it might be, order values for both dates in one assignment. It is easier and more consistent than ordering a second report later.
3. Track dispositions. Write down the date any property is sold, distributed or transferred within the six months.
4. Document condition over time. Photos at death, at any repair, and at the six-month mark.
5. Watch the calendar. Form 706 is due nine months after death, and the election is lost if the return is filed more than a year after the due date, including extensions.
6. Remember it covers everything. You cannot pick the alternate date for the house and the date of death for the stock portfolio.

What I see in the field

Estate, probate and trust work is a big part of my practice. When the alternate date is in play, the most useful thing I can give the CPA is two values built the same way, side by side, so the comparison is clean.

A good report on either date teaches the reader the market at that moment. It shows the sales, explains what changed between the two dates, and makes clear how condition was established. When the IRS can follow the reasoning, the value holds. When it cannot, the value becomes a conversation nobody enjoys.