Once you’ve established that Section 2801 of the
Internal Revenue Code applies, the next critical step is:
👉 What is the transfer worth?
Because under §2801, value = tax base.
Valuation follows standard U.S. transfer tax principles:
👉 Fair Market Value (FMV)
Defined as:
• The price a willing buyer and seller would agree
• With both parties having reasonable knowledge
• And neither under compulsion
• Value is determined at the date the recipient receives the property
• Value is determined when the U.S. beneficiary actually receives the distribution
👉 Not when assets enter the trust—but when they come out.
Certain assets require special valuation considerations:
• Market comparables
• Location and condition
• Income potential
• Lack of marketability discounts
• Minority interest discounts
• Earnings and asset-based methods
• Market price (if publicly traded)
• Adjustments for restrictions or liquidity
Valuation directly determines:
• The §2801 tax liability
• Exposure to:
👉 Even small valuation errors can have material tax consequences
In complex or high-value cases:
• Independent professional appraisals are often essential
👉 Especially for:
• Private companies
• Illiquid assets
• Cross-border holdings
To support reported values:
• Maintain:
👉 This is critical for:
• Audit defense
• Consistency across filings
Under §2801:
• Transfers are valued at fair market value
• Timing depends on when the recipient receives the asset
• Complex assets require careful and defensible valuation
In practice:
The tax isn’t just about what you receive—it’s about what the IRS believes it’s worth.
