What is the basis for valuing cash and property bequeathed through a will?

The basis for valuing cash and property bequeathed through a will is determined by the fair market value at the time of the decedent's death. This valuation method is crucial because it reflects the price at which the assets would sell in an open market, ensuring that the fair equity in the property is represented in the estate.

Using fair market value provides a more accurate reflection of what beneficiaries would realistically inherit, allowing for a fair distribution among heirs. Additionally, this value serves as the basis for calculating capital gains taxes if the beneficiaries decide to sell the inherited property in the future.

In contrast, face value, which represents a nominal value, or the cost basis determined at the time of purchase, might not accurately represent the current worth of the assets. Similarly, replacement cost, which estimates the expense to replace the asset with a new one, can also diverge significantly from the actual market conditions at the time of death. Understanding that fair market value is used for these purposes is essential for accounting and tax implications associated with estate inheritance.