Yes, you need a qualified appraisal for Form 706 whenever you file the estate tax return, elect portability, or claim alternate valuation. That appraisal has to be USPAP-compliant, prepared by an independent qualified appraiser, dated to the decedent’s date of death, and attached to Schedule A. Skip it, and you’re gambling with penalties and a drawn-out IRS review.
TL;DR:
- An appraisal for Form 706 must be USPAP-compliant, independent, and dated to the decedent’s date of death unless an alternate valuation is elected.
- Real estate, business interests, and significant personal property require formal valuation reports, especially if they lack readily available market prices.
- A qualified appraiser must have verifiable credentials, experience, and independence, avoiding contingent fees or family connections.
- Proper appraisals need detailed components including approaches used, comparable sales, adjustments, and a signed certification, to withstand IRS review.
- Early engagement and comprehensive documentation prepare the estate for potential IRS challenges and facilitate smooth filing and dispute resolution.
Table of Contents
- What Form 706 Requires: Assets, Schedule A, and When to Attach an Appraisal
- Who Counts as a Qualified Appraiser (and What the Report Must Include)
- Timing, Valuation Dates, and Coordinating With Your Tax Team
- Common Pitfalls That Trigger an IRS Challenge
- How NJREAG Handles Form 706 Appraisals in New Jersey
- Get a State-Certified Form 706 Appraisal Before Your Filing Deadline
- Sources
- FAQ
What Form 706 Requires: Assets, Schedule A, and When to Attach an Appraisal
Form 706 requires executors to report the decedent’s entire gross estate at fair market value, and the instructions from the IRS confirm that value is measured at the date of death unless you elect alternate valuation. That gross estate covers more than the house and the bank account.
Real estate, closely held business interests, and substantial personal property (art, collectibles, equipment) all typically need a formal appraisal to survive IRS scrutiny. A tax bill’s assessed value or a rough guess from a relative won’t cut it.
Real property gets reported on Schedule A, and that’s where the appraisal report gets attached. Here’s what typically triggers a mandatory or strongly advised appraisal:
- Any real estate held solely or jointly by the decedent at death
- Business interests without a readily available market price
- Personal property collections worth enough to move the needle on estate tax liability
- Fractional or undivided real estate interests, which need separate valuation logic
There’s one notable exception. If the property sells within a year of death in an arm’s length transaction, the sale price can generally represent fair market value instead of a formal appraisal. Even then, many estate attorneys still recommend getting an appraisal anyway, particularly when there’s any chance of a dispute among heirs or an IRS inquiry down the road.
Who Counts as a Qualified Appraiser (and What the Report Must Include)
The IRS doesn’t accept just anyone’s opinion of value. A qualified appraiser needs verifiable education and credentials in property valuation, hands-on experience with the specific asset type, and complete independence from the estate. No contingent fees. No family members appraising family property. No exceptions on that last point.
Business interests carry their own standard. They generally require a formal appraisal that applies Revenue Ruling 59-60 and documents fair market value as of the date of death under Treasury Regulation Section 20.2031-1.
A qualified appraisal report needs specific components to hold up under review:
- Effective valuation date matching the date of death (or the alternate valuation date, if elected)
- Defined property interest being valued (fee simple, fractional share, easement-encumbered, etc.)
- Approaches to value used — sales comparison, income, or cost — with justification for any approach left out
- Comparable sales or data with clear, documented adjustments
- Reconciliation explaining how the appraiser arrived at the final opinion of value
- Signed certification under penalty of perjury, stating USPAP compliance
USPAP compliance and a clear certification statement aren’t paperwork formalities. They tell an examiner this appraisal was built to survive challenge, which reduces friction during IRS review before it even starts.
Pro Tip: Ask any appraiser you’re considering to show you a sample certification page before you hire them. If it doesn’t explicitly state USPAP compliance and independence from the estate, keep looking.
Timing, Valuation Dates, and Coordinating With Your Tax Team
Date of death is your default valuation date. But if the estate’s overall value dropped in the six months after death, you can elect alternate valuation and value assets as of that later date instead, as long as it reduces both the gross estate and the resulting estate tax.
That election isn’t automatic. It has to be made on a timely filed Form 706, and once you make it, it applies to every asset in the estate, not just the ones that dropped in value.
Order your appraisal early. Retrospective, date-of-death valuations take real research time. Comparable sales data, market conditions from that specific window, and any adjustments for time all need to be pulled together before your filing deadline hits.
Give your appraiser everything upfront:
- The deed and prior title documents
- Any existing survey or floor plans
- Rent rolls, if it’s an income-producing property
- Recent tax bills and assessment history
- Photos and details on any recent renovations or damage
In return, expect a full report with supporting workpapers, not just a one-page value conclusion. Your CPA or estate attorney will need those workpapers if the IRS ever asks follow-up questions. Executors working through New Jersey probate should also review our property appraisal guide for probate for county-level timing details.
Common Pitfalls That Trigger an IRS Challenge
Assessed values and real estate agent CMAs are the two most common mistakes executors make, and examiners reject both routinely because neither documents fair market value at the date of death or discloses methodology.
IRM guidance directs examiners to specifically check appraiser independence and documentation adequacy, so a contingent-fee appraisal or one prepared by someone connected to the estate is an immediate red flag.
Watch for these methodology failures, including choosing comparables without following best practice for selecting comparable properties:
- Missing time adjustments between the comparable sale date and the date of death
- Weak or thin comparable selection with no explanation of why those sales were chosen
- Unsupported discounts for fractional or minority business interests with no market evidence behind them
The fix is workpapers. Full documentation of every comparable, every adjustment, and a narrative explaining market conditions as of the valuation date lets your appraiser reconcile all approaches to value clearly. IRM 4.48.6 requires exactly that kind of documented reconciliation, and a report built to that standard is a report built to survive an audit.
How NJREAG Handles Form 706 Appraisals in New Jersey
We’re a state-certified appraisal firm, and every estate report we deliver is built to USPAP standards from day one. That’s not a talking point. It’s how we structure comparable selection, time adjustments, and the reconciliation section from the start.
For fractional interests or business real estate, we document the market evidence behind any discount for lack of control or marketability, tied to county-level data across all 21 New Jersey counties. If your appraisal ever gets challenged, that documentation is already sitting in the file.
Give us the deed, prior surveys, and photos, and we’ll walk you through what else we need. We coordinate directly with your attorney or CPA so nothing falls through the cracks before your filing deadline. See our court-ready estate and date-of-death appraisal services for more on how we structure these reports.
— Alek
Get a State-Certified Form 706 Appraisal Before Your Filing Deadline
Newjerseyrealestateappraisal is the direct alternative to guessing with assessed values or an agent’s rough estimate. Our reports are state-certified, USPAP-compliant, and built with full workpapers, comparables, and reconciliation from the start, so your executor or attorney isn’t scrambling to backfill documentation when the IRS asks a follow-up question.
We’ve handled date-of-death and estate appraisals across all 21 New Jersey counties for over 26 years, and we know what an examiner looks for on Schedule A. If you’re in Atlantic County, start with our Atlantic County appraisal services page. Union County executors can go straight to our Union County appraisal services. Have the deed, prior tax bills, and any survey ready, then call us at (908) 517-3913 or request a quote through our services page to get your Form 706 appraisal moving before your deadline closes in.
This article is general information, not a substitute for advice from a qualified financial advisor. Consult a qualified financial professional about your own circumstances before acting on anything here.
Sources
- Instructions for Form 706 (Rev. September 2025)
- Fair market value for estate tax: what executors need – Sofer Advisors
FAQ
Do I always need an appraisal to file Form 706?
You need a qualified appraisal whenever you’re valuing real estate, business interests, or significant personal property that lacks a clear market price, unless the property sold at arm’s length within a year of death.
What makes an appraiser “qualified” for IRS purposes?
A qualified appraiser has verifiable credentials and experience with the specific property type, works independently of the estate, and never charges a contingent fee tied to the value conclusion.
Can I use the county’s assessed value instead of an appraisal?
No. Assessed values don’t document fair market value as of the date of death or disclose any methodology, and examiners routinely reject them under IRM guidance.
How does alternate valuation work on Form 706?
Alternate valuation lets you value the entire estate six months after the date of death instead, but only if that election lowers both the gross estate value and the total estate tax owed.
What happens if the IRS challenges my appraisal?
An examiner will review your appraiser’s qualifications, independence, and documentation; a report with full workpapers, defined comparables, and a clear reconciliation gives you the strongest position if the value gets questioned.