The Internal Revenue Services, offers helpful information for people filing Form 706. Their toll-free phone number is (866) 699-4083, and their web site offers further help. We have selected the IRS regulations which are most frequently of interest to our clients.
Security Valuations
The mean price is calculated as the average
of the high and low on the valuation date, when available. If these
prices are not available (holiday, weekend or the issue did not
trade), the mean price is the inversely weighted average of the high
and low on the nearest trading dates before and after. If actual
trades are not available, the nearest bid and ask prices are
used.
[ IRS Reg. 20.2031-2 ]
The IRS issued a letter ruling on September
26th, 2005 in which it changed it’s methodology for the valuation of
municipal bonds. Click here
to read the letter.
For open ended investment companies (commonly known as mutual
funds) the fair market price is the public redemption price on the
valuation date. Should no price be available for that date, the
price used will be the price for the first day preceding the
valuation date.
[ IRS Reg. 20.2031-8b ]
For alternative valuations, the above methodology holds true
except for any issues where the price fluctuation is affected by a
"mere lapse of time". Such issues are valued as of the date of
death.
[ IRS Reg. 20.2032-1(3) ]
Dividend and Accrual Calculation
If an equity is ex-dividend for a cash
distribution on or before the valuation date but is of record after
the valuation date, the dividend is included in the report and is
added to the security's mean value.
[ IRS Reg. 20.2031-2(i) ]
If an equity is ex-dividend and record for a cash distribution on
or before the valuation date, but is payable after the valuation
date, a separate dividend accrual entry is made.
[ IRS Reg. 20.2032-1(d) (4) ]
Interest is accrued for bonds from and including the last payable
date up to and including the date of death.
[ IRS Reg. 20.2032-1(e) ]
Interest accruals are calculated on a 30/360 day basis for
corporate, government agency and municipal bonds. An actual day
basis is used for US Treasury Bonds and notes.
[ MSRB Rule G-33 ]
Series HH bonds are current-income bonds issued at par (face
amount). Interest on Series HH bond is paid semiannually by
check. In the case of a bond registered in the form "A payable on death to B", the check will be drawn to the order of "A" alone
unless the Bureau of the Public Dept, Parkersburg, West Virginia
26101, receives notice of A's death. In that event, the payment of
interest will be suspended until the bond is presented for payment
or reissue. Interest so withheld will be paid to the person entitled
to the bond.
[ IRS Reg. 353.31(iii) ]
