The IRS requires an updated value of all retirement accounts on an annual basis. IRA custodians must report the fair market value of all self-directed account(s) to the IRS, even if there was no change. For IRAR to report this information correctly, you must complete a FMV form for each asset.
To prove that the fair market value of your asset is accurate, supporting documentation showing asset value is required. If you hold cash and publicly traded securities, you do not need to provide an FMV for these assets because these investment values can be easily determined by the market. The same is true if you hold an interest only promissory note.
A value of each asset within a limited liability company (LLC) or entity is required to determine the value of the LLC or entity. Real estate assets owned in an LLC or other entity must be evaluated by a third party (see real estate section below). Other assets owned in an LLC or entity, such as a bank or brokerage account, should have year-end statements showing their value.
The value of the asset may be provided by a qualified third party, but they must provide sufficient supporting documents, such as:
A Property Tax Bill is acceptable, as long as it’s not used to calculate or take a required minimum distribution.
A Comparative Market Analysis (CMA) is a detailed report examining the homes currently on the market, under contract, recently sold and recently expired, withdrawn, or canceled to determine what a property is worth in the current market.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 licensed real estate professional, who is strictly at “arm’s length” from both you (the account owner) and the investment, can provide the CMA. If providing a CMA, the licensed real estate professional must sign and date the Fair Market Valuation Form.
A real estate appraisal is always acceptable, but not always required. An appraisal is REQUIRED when:
Taking an in-kind asset distribution
Converting an asset in a Traditional IRA to a Roth IRA
Calculating or taking a required minimum distribution
An opinion letter on company letterhead from a qualified, independent third party is also acceptable. If providing an opinion letter, the third party must sign and date the letter and the Fair Market Valuation Form.
You will not need a qualified, independent third party to perform the valuation. However, in order to remove the asset(s) from your account, there are specific types of documentation needed. The following are some acceptable examples of documentation for a worthless asset that need to be submitted with the FMV form:
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 remove the real estate asset(s) from your account, there is specific documentation needed.
The following are some examples of acceptable documentation for a worthless real estate asset:
Deed in Lieu of Foreclosure or a copy of the recorded Trustee’s Deed (for defaulted mortgage)
County’s recorded Tax Deed (for defaulted property taxes)