What is Fair Market Valuation (FMV)?
A Fair Market Valuation (FMV) is part of the Internal Revenue Service (IRS) reporting requirements that provide
Important Guidelines for Your Fair Market Valuation
- An FMV is also required when you’re taking an in-kind asset distribution, converting an asset and re-characterizing an asset.
- The Fair Market Valuation form must be signed and dated by you.
- 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 more information, download the FMV guides and forms below:
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 same FMV information for the account.
How Do I Report my Fair Market Valuation to Entrust?
Step 1 - The 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is a detailed report examining the homes currently on the market, under contract, recently sold and recently expired, withdrawn or canceled to determine what a property is worth in the current market.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: firstname.lastname@example.org
- By fax: (510) 587-0960
- By mail: The Entrust Group, ATTN: FMV, 555 12th Street, Suite 900, Oakland, CA 94607
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
valuatormust also sign and date the form
- 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.
Types of Assets and How to Report Them:
For detailed information regarding real estate fair market valuations, please refer to our Real Estate FMV FAQs:
Real Estate Fair Market Valuation Instructions & FAQs
The value of the asset may be provided by a qualified third party, but they must provide sufficient supporting documents with the Fair Market Valuation Form.
Precious Metals, Brokerage Accounts, Publically Traded Assets, & Cash
These asset types DO NOT require a fair market valuation because these investment values can be easily determined by the market. If you currently provide regular statements that have unit/share balances on them, we will use those statements for the valuation.
LLCs and Entities
A value of each asset within a limited liability company (LLC) or entity is required in order to determine the value of the LLC or entity. Real estate assets owned in an LLC or entity must be evaluated by a third party. Other assets owned in an LLC or entity, such as bank or brokerage accounts, should have year-end statements proving their value.
Please indicate the status and value on the Fair Market Valuation form and sign it yourself. Provide the necessary documentation that will support the status and value. You will not need a qualified, independent third party to perform the valuation. However, in order to zero out assets from your account, the Internal Revenue Code requires specific types of documentation to do so. The following are some acceptable examples:
- A Trustee’s Deed (for a Deed of Trust asset)
- Bankruptcy/Receivership paperwork
- A “cease and desist order” from an entity such as the SEC or a similar state agency