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Access the largest knowledge base for Self-Directed IRAs. Expand your investor knowledge with articles, whitepapers, practical guides and tons of other educational resources.

About Entrust

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For 40 years, The Entrust Group has provided account administration services for self-directed retirement and tax-advantaged plans. Entrust can assist you in purchasing alternative investments with your retirement funds, and administer the buying and selling of assets that are typically unavailable through banks and brokerage firms.

Fair Market Valuations: What They Are and How To Report Them

Fair Market Valuations: What They Are and How To Report Them

Estimated reading time: 2 minutes

The end of the year is in sight, and with that comes fair market valuations. The fair market value of an IRA must be reported to the IRS by the IRA’s custodian by December 31 each year.

So what is a FMV anyway?

Fair market value (FMV) is an estimate of the market value of an asset, based on what a knowledgeable, willing, and unpressured buyer would likely pay to a knowledgeable, willing, and unpressured seller. It’s used to assign or change the value of an asset.

What the IRS Requires

The requirements of the fair market valuations themselves vary from asset to asset, but here’s what the IRS requires from the FMV overall:

  1. A Self-Directed IRA administrator (such as Entrust) must provide the FMV of the account as of Dec. 31 of each year.
  1. The valuation must be paid for by the IRA. If your account doesn’t have sufficient undirected cash to cover the cost, you’ll have to add cash by making an annual contribution, transfer, or rollover of funds from another custodian to pay for it.
  2. The FMV Form must be provided to your IRA custodian on a yearly basis to ensure proper tax reporting.

You also need to submit a FMV when:

  • Taking an in-kind distribution
  • Converting an asset held in a tax-deferred account to a post-tax account
  • Converting an entire tax-deferred account to a post-tax account
  • Demonstrating an asset no longer has value

Your Responsibility

It’s your responsibility to obtain the investment values of your self-directed assets and send them to your custodian so they can report your account’s fair market value to the IRS. Depending on the type of asset you hold, a qualified, independent third party might need to perform the valuation and complete a section of the FMV.

Qualified third parties who can perform your valuation include:

  • Managing partner (or equivalent) of investment sponsor
  • Certified appraisers
  • Licensed real estate professionals (such as brokers/real estate agents)
  • Knowledgeable parties (such as CPAs, Attorneys, Financial Planners, etc.)

For complete details as to how to submit a FMV for your Entrust account, check out our FMV page and download the FMV instructions.

Self-Directed IRAs:
The Basics Guide

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