How do I report the Fair Market Value (FMV) of my assets? – IRA Central

As part of the IRS requirements for retirement accounts, IRA custodians like American Estate & Trust (AET) must report the Fair Market Value (FMV) of all assets held within Self-Directed IRAs (SDIRAs) annually, as of December 31st of the reporting year. The FMV reporting process ensures compliance with IRS regulations, and it is necessary to submit accurate information to avoid complications with Required Minimum Distributions (RMDs) and taxable events. Here's how you can report the FMV of your assets.

Step-by-Step Process for Reporting FMV

To report the FMV of your assets, follow these steps:

Login to Your Online Portal Access your AET account via the Online Portal.
Submit an "Update Asset Value" Request
- Navigate to the "Assets" tab on the left-hand side of the portal.
- Click the "Update Asset Value" button on the right side of the screen.
- Follow the instructions provided to submit your request for each individual asset.
Upload Supporting Documentation Along with the FMV of your asset, you are required to provide supporting documentation to verify its value. This documentation must be prepared by a qualified, independent third party, such as a certified appraiser, licensed real estate professional, CPA, or attorney. The third party must have no personal involvement with the asset or any relationship beyond a professional business connection with you, the account holder.

Supporting Documentation for Specific Assets

Here’s a breakdown of the documentation needed for different types of assets:

LLCs and Entities: If your asset is held in an LLC or other entity, provide the total value of all assets within the entity. Real estate assets must be appraised by a licensed real estate appraiser. For other assets, such as bank or brokerage accounts, submit year-end statements showing the asset’s value.
Private Placement Memorandum (PPM): For PPM assets, the asset’s value must be provided by a qualified third party. You will also need to submit supporting documents, such as a letter or statement from the investment entity. This statement must be signed, dated, and notarized by an authorized person on behalf of the entity.
Real Estate: A real estate appraisal is required when determining the FMV of property. The appraisal must be performed by a licensed and impartial third-party appraiser, with no relationship to the IRA account holder. Appraisals are required when taking in-kind asset distributions, converting Traditional IRA assets to Roth IRAs, or calculating/taking required minimum distributions (RMDs).
Brokerage Account: For assets held in a brokerage account, a current statement showing the current value of invested funds is required.
401(k)/MySOP: For 401(k) or MySOP assets, no supporting documentation is required. However, AET does not provide tax reporting for 401(k) accounts. You may want to consult a tax professional regarding any potential tax liabilities related to distributions from a MySOP asset.

Key Considerations for FMV Reporting

FMV Assessment Date: The IRS requires the FMV to be assessed as of December 31st of the reporting year. This ensures that your reported values reflect the most current market data.
Consequences of Not Providing FMV: If you fail to submit your FMV by the March 1st deadline for IRS Form 5498 submission, AET will report the last known value to the IRS. This can affect RMD calculations, tax filings, and taxable events for the year.
Valuation for Different Asset Types:
- Real Estate: Use a Comparative Market Analysis (CMA) or Property Tax Bill for non-taxable situations. A real estate appraisal is required for taxable events like Roth conversions or RMDs.
- LLCs/LPs/Private Companies: The value of the assets within LLCs or similar entities must be evaluated individually, and third-party valuations should follow IRS Revenue Ruling 59-60.
- Precious Metals: For precious metals, the spot value is used (multiplied by the ounces owned).

Reporting Worthless Assets

If any of your assets are considered worthless, such as a bankrupt entity, you are required to submit an Asset Valuation Review via the Online Portal. Supporting documentation like bankruptcy discharge paperwork or a cease and desist order is required, but no third-party valuation is necessary.

The FMV Reporting Process

AET requires that FMV reporting be completed annually for Form 5498, which is submitted to the IRS by March 1st. The form will include:

Fair market value of the IRA as of December 31
IRA or Roth contributions made during the year
Amounts of rollovers
RMD amounts
FMV of alternative assets held in the IRA

After submitting your FMV, AET will file Form 5498 on your behalf, providing the IRS with a snapshot of your IRA as of December 31.

Importance of Accurate FMV Reporting

Accurate FMV reporting is not only crucial for compliance with the IRS, but it also helps in investment strategy planning. By ensuring your assets are properly valued, you can maintain proper tax calculations, avoid penalties, and get a clear picture of your investment performance.

Conclusion

Reporting the FMV of your assets is essential for staying compliant with IRS regulations. Be sure to gather the necessary supporting documentation and submit your FMV request through the AET Online Portal. Accurate reporting helps avoid complications with RMDs, taxable events, and keeps your account in good standing with the IRS. For detailed instructions or assistance, refer to the FMV Instruction Page on the AET website or consult with a tax professional.