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Every year, the IRS requires a report of the value of your IRA assets. This is where the fair market valuation (FMV) comes in. A fair market valuation is used to assign or change the value of an asset in a self-directed IRA. A Fair Market Valuation Form must be submitted on a yearly basis, and valuation of assets in a self-directed account must be provided to The Entrust Group, Inc. (“Entrust”) to ensure proper tax reporting to the Internal Revenue Service (IRS). This is required for all IRAs and is not a special addendum to self-directed retirement accounts. But the process is different from reporting the value of non-monetary assets like stocks, bonds, and CDs. To make the process easier, we've collected the most frequently asked questions about the FMV process:
How do I properly report the FMV of an asset?
To properly report the FMV of an asset, a qualified, independent third party should perform the valuation and then complete the Fair Market Valuation Form.
Who can perform valuations?
A qualified, independent third party should perform the valuation and then complete the Fair Market Valuation Form. This person can be a certified appraiser, a licensed real estate professional (in the case of real estate assets), or a knowledgeable professional such as a CPA, attorney, or financial planner. It’s important that this person is not personally involved in any of your assets or has anything other than a business relationship with you, the client. The valuation must be accurate, especially if the amount is used for taxation or is involved in calculating amounts such as a Required Minimum Distribution.
What does the IRS require?
The Internal Revenue Service requires Entrust to provide the FMV of our clients’ accounts as of Dec. 31 of each year. The valuation is paid for by the IRA. If your account does not have sufficient un-directed cash to cover the cost, you will have to add cash by making an annual contribution, transfer, or roll over funds from another custodian to pay for the valuation. The FMV Form must be provided to Entrust on a yearly basis – due by Jan. 31 – to ensure proper tax reporting. An FMV is also required when you’re taking an in-kind asset distribution, converting an asset and re-characterizing an asset.
How do I use the FMV form?
The Fair Market Valuation Form must be signed and dated by both the client and the valuator, if an appraisal is not required. If the appraisal is required, the appraiser does not have to sign the FMV Form. The appraisal report is sufficient.
A separate FMV Form must be completed for each asset held in your account.
The form, as a final step, needs to be sent to Entrust with supporting documents, which may include:
A Real estate fair market value analysis, more commonly known as a comparative market analysis (CMA). This is a detailed report examining the homes currently on the market, under contract, recently sold and recently expired, withdrawn or canceled to determine what a property is worth in the current market.
Where do I send my forms?
Once the FMV Form is completed and you have the supporting documentation, you can submit it to us by fax, email or mail.
By fax: 510-587-0960
By email: Forms@TheEntrustGroup.com
By mail: The Entrust Group; 555 12th Street, Suite 900; Oakland, CA 94607
Click here to visit our FMV page on the Entrust website for further information about submitting your FMV forms.
If you find a discrepancy, please contact us immediately. We will also send a copy of this form to the IRS.
Additional important items to know:
- The Fair Market Valuation Form must be signed and dated by you
- If an appraisal is required, the appraiser does not have to sign the form; the appraisal report is sufficient
- If an appraisal is not required, the third party valuator must also sign and date the form
- The form must be sent to Entrust with supporting documents
- A separate Fair Market Valuation Form must be completed for each asset held in your account
For investments that you may have deemed "worthless" or "lost", contact Entrust for questions specific to your account.
For more information and frequently asked questions, download our free guide to Real Estate Fair Market Valuations.