Written by Russell Harrist
Colorado Certified Residential Appraiser · Certified Probate Expert (CPE) · 25 Years of Experience
Published August 4, 2026
Federal law allows certain estates to value assets six months after the date of death rather than on the date of death itself. Here is what the alternative valuation date is, when it can be elected, and what it means for the appraisal.
Federal law (IRC § 2032) allows an estate to elect an alternative valuation date for federal estate tax purposes. Rather than valuing estate assets as of the date of the decedent’s death, the estate may instead elect to value them as of six months after the date of death.
This election is available only for federal estate tax purposes. It is not available for stepped-up basis purposes or for any valuation standard other than the federal estate tax calculation under IRC § 2032.
The alternative valuation date is generally relevant only for estates that exceed the federal estate tax exemption threshold. For the vast majority of Colorado estates, which do not reach this threshold, this provision does not apply.
The alternative valuation date election is not available to every estate. All of the following conditions must be met:
If all three conditions are met, the election is made on the estate tax return (Form 706). The decision must be made in consultation with the estate attorney and CPA. Once made, it is generally irrevocable.
If the value of estate assets declined in the six months following the date of death, electing the alternative valuation date reduces the taxable estate, and therefore the federal estate tax owed. The benefit can be substantial for large estates with significant real property holdings in a declining market.
Illustrative example: An estate includes a Colorado residential property worth $2.8 million at the date of death. Six months later, due to market conditions, the same property is worth $2.4 million. If the estate elects the alternative valuation date, the taxable value of this asset is $2.4 million rather than $2.8 million, a $400,000 reduction. At a 40% federal estate tax rate, this saves $160,000 in estate tax.
The benefit is real, but so is the analytical complexity. Not all assets decline in value over six months, and partial dispositions of estate assets in the six-month window add further complexity to the calculation. Legal and tax counsel is essential.
Even when an estate elects the alternative valuation date, a date of death appraisal is typically still required. The IRS requires that the estate demonstrate both values (the date of death value and the alternative date value) in order to support the election on the estate tax return.
In practice, this often means two appraisals are needed:
Both must be USPAP-compliant appraisals prepared by a qualified appraiser. Great Estates can prepare both reports for the same property. Contact Russell to discuss the scope and combined fee for this type of dual-effective-date engagement.
The alternative valuation date election affects the federal estate tax calculation only. The stepped-up cost basis for heirs is always calculated using the date of death value, not the alternative date, regardless of which date is elected for estate tax purposes. This distinction is important for heirs who may later sell the property.
The decision of whether to elect the alternative valuation date is a legal and tax determination that must be made by the estate attorney and CPA, not by the appraiser. The appraiser’s role is to provide accurate, USPAP-compliant valuations at the effective date(s) specified in the engagement.
Contact Russell before placing an order if you are considering or planning to make the alternative valuation date election. The engagement scope, particularly whether one or two effective dates are needed, must be set correctly from the start. Trying to add an alternative effective date after a report is already prepared creates unnecessary complications.
Russell is available to discuss the appraisal scope with the estate attorney or CPA directly if that is helpful for coordinating the engagement.
Contact Russell before placing an order to discuss the appraisal scope, effective date requirements, and combined fee for dual-date engagements.