Iowa Administrative Code › Agency 701 - Revenue Department › Title I - Administration › Chapter 86 - Inheritance Tax › Rule 701-86.9 - 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
				  45037.
				  and subrules 86.9(1) and 86.9(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
				  45037.
				  and
				  45027.
				  and subrule 86.9(2). Effective for estates with decedents dying on or after
				  July I, 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
				  45037.
				  and
				  45027.
				  and subrule 86.9(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
				  45037.
				  and subrule 86.9(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
				  45094(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 45 OB, property included in the gross estate for inheritance tax
				purposes must be valued under the provisions of Iowa Code section
				45037.
				at its market value in the ordinary course of trade. See rule
				701-8610.
				(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
				44121(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
				45037.,
				or the tax has been deferred according to Iowa Code sections
				45044. to
				45049., 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
				4502..
				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).