Asset Insights for Life's Transitions

Estate Tax Appraisals and IRS Form 706

An estate tax appraisal provides a defensible fair market value for property as of the decedent’s date of death—or, when elected, the alternate valuation date. These values are used to complete IRS Form 706, calculate potential estate tax, and establish the beneficiaries’ income‑tax basis for inherited assets.

A well‑supported appraisal ensures the estate’s reported values are accurate, compliant, and ready for review by the IRS, attorneys, and tax professionals.

When Form 706 Must Be Filed

For individuals who pass away in 2026, Form 706 is generally required when the gross estate, adjusted taxable gifts, and applicable exclusion amount exceed the $15 million federal filing threshold.

A return may also be necessary for smaller estates if the executor chooses to elect portability, allowing the surviving spouse to use the deceased spouse’s unused exclusion amount (DSUE).

Key timing requirements:

• Form 706 is due nine months after the date of death.

• Executors may request a six‑month filing extension using Form 4768.

• An extension to file does not extend the deadline to pay any estate tax owed.

Assets That Typically Require Appraisal

Depending on the estate, valuations may be needed for:

• Residential and commercial real estate

• Vacant land and partial ownership interests

• Farms, ranches, and timber property

• Closely held businesses, partnerships, LLCs, and professional practices

• Artwork, antiques, jewelry, vehicles, and collectibles

• Household contents and general personal property

• Specialized assets such as mineral rights, intellectual property, or restricted securities

The gross estate generally includes individually owned property, joint interests, certain trust assets, life insurance proceeds, retirement benefits, and other transfers that take effect at death. Each category is reported on the appropriate Form 706 schedule.

What a Qualified Estate‑Tax Appraisal Should Include

A reliable appraisal for Form 706 must:

• Identify the exact valuation date

• Describe the property and the ownership interest being valued

• Define fair market value as required by IRS standards

• Explain the valuation approach and assumptions

• Analyze comparable sales, income data, market conditions, and any relevant restrictions

• Document the appraiser’s qualifications and independence

• Include photographs, supporting evidence, calculations, and certifications

Estate‑tax valuation is a date‑specific snapshot. While later events may help confirm value, the appraisal must rely on information known—or reasonably knowable—on the valuation date, not hindsight.

For artwork and certain collectibles, IRS instructions require a signed expert appraisal under oath when an item or group of similar items exceeds $3,000.

Special Valuation Elections That Affect Appraisals

Form 706 includes elections that can significantly influence how property is valued:

Alternate Valuation Election

Allows the estate to use values six months after death, with special rules for property sold or distributed earlier.
This election applies to the entire estate, not individual assets.

Special‑Use Valuation (Section 2032A)

Permits qualifying farm or closely held business real property to be valued based on its actual use, rather than highest and best use.
Additional requirements and Schedule T apply.

Portability Election

Allows the surviving spouse to use the deceased spouse’s unused exclusion amount.
A timely Form 706 is required even when no estate tax is due.

Because these elections can change the valuation date and assumptions, the executor should coordinate with the estate’s CPA or tax attorney before the appraisal is finalized.

Practical Checklist for Form 706 Preparation

• Determine whether Form 706 is required or advisable for portability

• Compile a complete inventory of assets and ownership interests

• Obtain qualified appraisals for real estate, business interests, and significant personal property

• Gather deeds, operating agreements, financial statements, loan documents, insurance records, and prior gift‑tax returns

• Coordinate valuation conclusions with the estate’s attorney and CPA

• Attach required appraisals and supporting schedules to Form 706

• Track the nine‑month filing and payment deadlines

• Retain the appraisal for future use, including establishing beneficiaries’ basis when property is sold

For real estate, business interests, or complex assets, a specialized appraiser—not a general real‑estate agent or informal broker opinion—is typically required. Valuation discounts, family‑owned entities, and special elections can materially affect the final tax result, making professional coordination essential.

The Peterson Exchange - Auctions & Appraisals LLC © 2025. All rights reserved.