Iowa Administrative Code › Agency 701 - Revenue Department › Title X - Inheritance Tax › Chapter 900 - Inheritance Tax › Rule 701-900.9 - Market Value in the Ordinary Course of Trade

Current through Register Vol. 47, No. 3, July 24, 2024
Fair market value of real or personal property is established
				  by agreement or the appraisal and appeal procedures set forth in Iowa Code
				  section 450.37 and subrules 900.9(1) and
				  900.9(2). If the value is established by agreement, the agreement may be to
				  accept the values of such property as submitted on the Iowa inheritance tax
				  return, to accept a negotiated value or to accept the values as finally
				  determined for federal estate tax purposes. Values submitted on an inheritance
				  tax return constitute an offer regarding the value of the property by the
				  estate. An inheritance tax clearance that is issued based upon property values
				  submitted on an inheritance tax return constitutes an acceptance of those
				  values on that return. An agreement to accept negotiated values or accept
				  values as finally determined for federal estate tax purposes must be an
				  agreement between the department of revenue, the personal representative, and
				  the persons who have an interest in the property. If an agreement cannot be
				  reached regarding the valuation of real property, then the department may
				  request, within 30 days after the return is filed, an appraisal pursuant to
				  Iowa Code sections 450.37 and
				  450.27 and subrule 900.9(2).
				  Effective for estates with decedents dying on or after July 1, 2004, if an
				  agreement cannot be reached regarding the valuation of real property, then the
				  department may request, within 60 days after the return is filed with the
				  department, an appraisal pursuant to Iowa Code sections
				  450.37 and
				  450.27 and subrule 900.9(2). If
				  an appraisal is not requested within the required period, then the value listed
				  on the return is the agreed value of the real property. If an agreement cannot
				  be reached regarding the valuation of personal property, the personal
				  representative or any person interested in the personal property may appeal for
				  a revision of the department's value as set forth in Iowa Code section
				  450.37 and subrule 900.9(2). Any
				  inheritance tax clearance granted by the department may be subject to revision
				  based on federal audit adjustments. Absent an agreement to the contrary, the
				  six-month extension of the statute of limitations for assessing Iowa
				  inheritance tax based on federal audit adjustments is limited to federal audit
				  adjustments that directly affect Iowa inheritance tax and involve Iowa
				  inheritance tax law that incorporates Internal Revenue Code provisions-see Iowa
				  Code section 450.94(5)  and
Kelly-Springfield Tire Co. v. Iowa State Board of Tax Review,
414 N.W.2d 113 (Iowa 1987).
(1)
In general.
With the exception of real estate which has been
				specially valued under Iowa Code chapter 450B, property included in the gross
				estate for inheritance tax purposes must be valued under the provisions of Iowa
				Code section 450.37 at its market value in
				the ordinary course of trade. See rule
				701-900.10 (450) for the rule
				governing the market value in the ordinary course of trade if the alternate
				valuation date is elected. "Market value in the ordinary course of trade" and
				"fair market value" are synonymous terms.
In re Estate of
				McGhee,
105 Iowa 9, 74 N.W. 695 (1898). Fair market value is the price
				at which the property would change hands between a willing buyer and a willing
				seller, neither being under any compulsion to buy or to sell and both having
				reasonable knowledge of relevant facts. The fair market value of a particular
				item of property includable in the decedent's gross estate is not to be
				determined by a forced sale price. Nor is the fair market value of an item of
				property to be determined by the sale price of the item in a market other than
				that in which such item is most commonly sold to the public, taking into
				account the location of the item whenever appropriate. See federal regulation
				Section 20.2031(1)(b)
				and Iowa Code section 441.21(1)
"b"
for similar definitions of
				fair market value.
a.
Values not to
				be used.
Other kinds of value assigned to property such as, but not
				limited to, assessed value of real estate for property tax purposes, cost
				price, true value, or book value are only relevant in computing the value of
				the property for inheritance tax purposes, to the extent they may be properly
				used in the determination of fair market value or special use value.
In
				re Estate of McGhee,
105 Iowa 9, 74 N.W.695 (1898). Fair market value
				cannot be determined alone by agreement between the persons succeeding to the
				decedent's property. Also, fair market value cannot be determined alone by
				setting out in the decedent's will the price for which property can be sold.
In re Estate of Fred W. Rekers,
Probate No. 28654, Black Hawk
				County District Court, July 26, 1972.
b.
Date of valuation.
Unless
				the alternate valuation date is elected under Iowa Code section
				450.37, or the tax has been
				deferred according to Iowa Code sections
				450.44 to
				450.49, all property includable
				in the gross estate must be valued at the time of the decedent's death for the
				purpose of computing the tax imposed by Iowa Code section
				450.2. Subject to the two
				exceptions listed, any appreciation or depreciation of the value of an asset
				after the decedent's death is not to be taken into consideration.
Insel
				v. Wright County,
208 Iowa 295, 225 N.W.378 (1929).