Estate valuation of stock options



Purchase Price Allocation PPA. The excess of the fair market etsate of a non-qualified stock option over the option price reported on an estate tax return is income with respect of a decedent, which means part of the estate tax ewtate be deducted on the income tax return of the estate, trust or beneficiary when the option is exercised. Table of Valuation of Stock Options. For this purpose, whether a corporation is considered comparable is determined by comparing relevant characteristics. GPO FDSys XML Text. The written statement must also be included with the employee's income tax return for the year of the transfer. Thus, the stock acquired through the exercise of an NQSO can also become the subject of a gift-giving program.




The Internal Revenue Code provides for two values: the "date of death" value or the "alternate valuation date" value. The gross estate is the value of its assets and property before taxes and debts are deducted. It includes all property owned by the decedent or in which he has an interest, regardless of whether the assets are subject to probate.

Why would the personal representative choose the alternate valuation date values instead of the date of death estate valuation option? Because if one or more of the estate's assets have lost significant value during the six months after death, the estate tax bill can be reduced. If the alternate valuation date values are used, however, then all the estate's assets must be revalued, not just those that have gone down in value. What happens if an asset is sold during the six months after the date of death?

Then the sales price of the asset must be used. The big downside to using the alternate valuation date values is that the step-up in basis that beneficiaries receive is locked in at the lower values. This can affect their capital gains liability should they later decide to sell their inheritances. Normally, a taxpayer's basis would be what he paid for the asset, plus estate valuation of stock options cost of capital improvements.

He pays capital gains tax on the extate between that and the sales price. His basis in inherited property is its value as of the date of valuation for estate tax purposes, so the lower the valuation, the more likely it o that he will realize capital gains if he sells. Estate and Gift Taxes. Wills and Estate Planning. Get Daily Money Tips to Your Esate. There was an error. Please enter a valid email address.




Internal Revenue Bulletin - August 25, 2003 - Rev. Proc.


What are stock options?

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