What is Fair Market Valuation (FMV)?
A Fair Market Valuation (FMV) is part of the Internal Revenue Service (IRS) reporting requirements that provide the value of an asset annually. An FMV is also required when a distribution occurs, and when converting or re-characterizing an asset. A prudent determination of the value of an asset such as an appraisal or other legitimate means must be submitted to your self-directed IRA administrator to ensure proper tax reporting to the IRS. The value of the asset is based on what a knowledgeable, willing, and unpressured buyer would likely pay to a seller.
Types of Assets and How to Report Them:
Precious Metals, Brokerage Accounts, Publicly Traded Assets, and Cash.
LLCs and Entities
What Does Entrust Do?
Entrust will provide the fair market value (FMV) of your account as of December 31 of each year to the IRS.
Entrust will provide the account owner with the IRS Form 5498 with the FMV information for the account.
How Do I Perform Valuations (Appraisals) for my Fair Market Valuation?
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. A qualified, independent third party may be a:
- Certified Appraiser
- Licensed Real Estate Professional (such as a broker/real estate agent)
- Knowledgeable Party (such as CPA, Attorney, Financial Planner, etc. who is strictly at “arm’s length” to both you and the investment)
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
The valuation is paid for by the IRA and 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 rollover funds from another custodian to pay for the valuation. The fee may not be paid out of your own pocket.
How Do I Report my Fair Market Valuation to Entrust?
Step 1 - FMV Form
Download the Fair Market Valuation Form here. Complete, sign and date one form for each asset held in your account.
Step 2 - Third Parties
If an appraisal is required, the appraiser does not have to sign the form; the appraisal report is sufficient. If a third-party
Step 3 - Supporting Documents
The form 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
canceledto determine what a property is worth in the current market.
- A Property Tax Bill is acceptable, as long as it is not used to calculate or take a distribution such as a Required Minimum Distribution (RMD).
Form submission options for The Entrust Group include:
- Online: Login to your Entrust Client Portal and complete the FMV Form
- By email: email@example.com
- By fax: (510) 587-0960
- By mail: The Entrust Group, ATTN: FMV, 555 12th Street, Suite 900, Oakland, CA 94607