Thanks. After reading what I posted, my estate lawyer agreed
that EVal made sense and that he was mistaken.

<< ================================================== ===== > << The foregoing is intended for educational purposes only > << and does NOT constitute legal OR professional advice. > << > << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org. > << Copyright (2005) - All rights reserved. > << ================================================== ===== >

noname87[at]hotmail.com wrote:

- quote -

SNIP

BTW - the estate tax form is Form 706. The gift tax form is
709. <g
EVal is correct. The bonds which matured after the date of
death do not have an alternate date valuation. The value
will be the DOD value which includes interst accrued to the
DOD. Interest which accrues from purchase to DOD is Income
in Respect of Decedent (IRD) and can be reported on the
final 1040 or the estate 1041 depending on the best benefit.

CDs and cash accounts are the same - no change in value.
Real estate rarely changes value in the 6 month period. If
it sells within a year of the death the Service usually
takes the position that the sale price is the actual DOD
value since all appraisals are an educated estimate of what
the property would sell for. Of course there may be market
changes which could change the value including major
renovation or factors out of the control of the estate such
as a toxic waste dump suddenly appearing next door.

Martha Matthews, EA

<< ================================================== ===== > << The foregoing is intended for educational purposes only > << and does NOT constitute legal OR professional advice. > << > << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org. > << Copyright (2005) - All rights reserved. > << ================================================== ===== >

I understand that the alternate date can only be used if it results in
a lower tax.

I thought I did understand bonds but not the tax code. The question was
raised because I found the following on a web site that specializes in
preparing estate evaluations. (note: the following is a direct quote
froom the site owned by "Estate Valuations & Pricing Systems, Inc.")


1) http://www.evpsys.com/software/faq/method/tbills.html states: (last
two paragraphs or #1 and all of #2 are why I asked the question)

How Do Treasury Bonds & Series E/EEs Price?

United States Treasury Bills and Series E/EEO Bonds are simple
securities that can suddenly become very confusing when they are
evaluated on the Alternate Date. They don't seem to follow the rules --
the value that appears on the Alternate Date report is exactly the same
as the value that appeared on the Date of Death! Other securities don't
behave that way. Why these?

To explain, let's take a look at the securities:

Treasury Bills: Issued for a term of one year or less, Treasury Bills
do not bear a stated interest rate. Instead, they are purchased at a
discount from their face value and accrue interest up to the face value
over their lifetime.

Series E and EE Bonds: Like Treasury Bills, Series E and EE Bonds are
also bought at a discount and do not bear a stated interest rate. They
also accrue interest as they approach maturity, but may sometimes be
ultimately valued higher than the face value of the Bond.

T-Bills and Series E/EE Bonds do not pay interest on a periodic basis,
unlike corporate and municipal bonds.

The chart below contains the valuation of a Treasury Bill on five
different dates. As one would expect, the total security value of the
T-Bill increases as the maturity date nears, finally reaching par on
the day the T-Bill matures.

See http://www.evpsys.com/software/faq/method/tbills.html for chart

Each value listed above is the combination of the purchase price of the
T-Bill and its accrual. This combination hides the fact that it is the
accrual that is growing, not the principal.

EstateVal, however, can show you how the value of the T-Bill is
actually changing. To do this, you must tell the program how much the
original purchase price of the security was. From the portfolio you
wish to edit:

Select the appropriate security and click the Adjust Inventory button.

Enter the original purchase price into the Purchase Price: field and
press OK.

Evaluate the portfolio.
Now, the same information is displayed this way:

See http://www.evpsys.com/software/faq/method/tbills.html for chart

What's important about separating these two values is that you can
easily see that it is the accrued interest on the T-Bill that is
changing, not the principal. This is significant because, according to
IRS regulations, an accrual is valued the same on the Alternate Date as
it is on the Date of Death.

Given this, all Treasury Bills and Series E and EE Bonds in your
portfolio will have the same value on your Date of Death report as on
your Alternate Date report -- the principal of the securities isn't
changing; it's the accrual that's growing. And that accrual is income
to the estate, rather than to the decedent.

2) http://www.evpsys.com/software/faq/m...s-savings.html
states:

Why Do Treasury Bills, Series E and Series EE Bonds Show the Same Value
on the Alternate Date as on the Date of Death?


Because the changes in the worth of these securities are caused by
accruing interest, not increases in their fundamental value. And, in
accordance with IRS rules, interest always ceases to accrue on the date
of death.

IRS Regulation 20.203-1 reads: "Any property, interest, or estate which
is affected by the mere lapse of time is valued as of the decedent's
death."

T-Bills, E and EE Bonds are bought at a discount and rise during the
course of their lifetime to their face value. This increase is steady
and predictable, not subject to market fluctuations -- in other words,
it is driven by the "mere lapse of time." Therefore, Alternate Date
reports will show the same value for these securities as Date of Death
reports.

Any Comments?

"noname87[at]hotmail.com" <noname87[at]hotmail.com> wrote:

- quote -

Face value. You do realize the election only applies if it
serves to reduce the estate tax, right?

- quote -

It does if you think it through. Your problem is that you
don't understand the workings of bonds.

--
David M. Woods, EA, ChFC, CLU
Woods Financial Services
Norwood, MA 02062
www.woods-financial.com

<< ================================================== ===== > << The foregoing is intended for educational purposes only > << and does NOT constitute legal OR professional advice. > << > << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org. > << Copyright (2005) - All rights reserved. > << ================================================== ===== >

I am the executor of a taxable estate. The estate had
several treasury bills (6 month) which matured 4 months
after the date of death of my mother. I have elected to use
the alternate evaluation date. What is the correct (for
federal estate taxes - form 709) evaluation of these
treasure bills? Is it a) the value at the date of death or
b)the face value.

For municipal bonds, I was told that the alternate
evaluation is the value at the six month date or if sold the
then the sale price (less the accrued interest) plus the
accrued interest up to the date of death. Since the
treasures have matured, any increase in the value of the
treasure since death is pure interest. So way isn't it
treated like a municipal bond. I realize it is a lot to ask
for the tax code to make sense.

<< ================================================== ===== > << The foregoing is intended for educational purposes only > << and does NOT constitute legal OR professional advice. > << > << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org. > << Copyright (2005) - All rights reserved. > << ================================================== ===== >