IRS Estate Tax Appraisal Requirements: 9-Month Window Explained

When an estate exceeds the federal estate tax exemption ($13.99 million in 2025, $14.35 million in 2026), the executor must file IRS Form 706 — and that filing requires a qualified appraisal of all real property included in the gross estate. The IRS doesn't accept Zillow estimates, broker price opinions, or tax assessor values. It requires a licensed appraisal that complies with the Uniform Standards of Professional Appraisal Practice (USPAP).

This guide explains when a federal estate tax appraisal is required, how the 9-month alternative valuation window works, what the IRS expects in the appraisal report, and how to avoid the most common mistakes that delay returns or trigger audits.

When is IRS Form 706 Required?

Form 706 (United States Estate Tax Return) is required when the gross estate exceeds the federal exemption amount in the year of death. For deaths in 2025, that threshold is $13.99 million. For deaths in 2026, it rises to $14.35 million due to annual inflation adjustments.

The gross estate includes:

• All real property owned at death (primary residence, vacation homes, rental properties, land)
• Financial accounts, investments, and retirement accounts
• Business interests and partnership shares
• Life insurance proceeds (if the decedent owned the policy)
• Gifts made within 3 years of death

Even if no estate tax is ultimately owed (due to the marital deduction, charitable bequests, or exemption portability), Form 706 must still be filed if the gross estate exceeds the threshold. And every piece of real property in that estate must be professionally appraised.

The 9-Month Alternative Valuation Window

Real estate markets move. A property worth $2.1 million on the date of death might be worth $1.85 million six months later — or $2.4 million. The IRS recognizes this volatility and allows executors to choose between two valuation dates:

• Primary valuation date: The date of death (most common)
• Alternative valuation date: Six months after the date of death

Under IRC § 2032, if the total gross estate value AND the estate tax liability both decrease when using the 6-month date, the executor can elect to use the alternative valuation. This election must apply to all assets in the estate — you can't pick and choose which properties get the alternative date.

Why this matters: In a declining market, choosing the alternative valuation date can save tens or hundreds of thousands of dollars in estate tax. In Phoenix, where home values dropped 15–20% during the 2008 recession, estates that used alternative valuation saved significant tax liability.

The catch: If you elect alternative valuation, the heirs' stepped-up basis for future capital gains is also reduced. Lower estate tax now might mean higher capital gains tax later when the property is sold. CPAs and estate planning attorneys carefully model both scenarios before making the election.

What the IRS Requires in an Estate Tax Appraisal

The IRS appraisal requirements are stricter than standard probate or divorce appraisals. IRS Publication 561 ("Determining the Value of Donated Property") and Form 706 instructions specify:

• Licensed or certified appraiser. The appraiser must hold a valid state license or certification. Arizona requires all real property appraisals for federally related transactions to be performed by state-licensed or certified appraisers under A.R.S. § 32-3601.
• USPAP compliance. The appraisal must comply with the Uniform Standards of Professional Appraisal Practice. This means a detailed comparable sales analysis, market conditions adjustment, and a signed certification of compliance.
• Effective date of appraisal. The report must clearly state the effective date of value (date of death or alternative valuation date six months later).
• Retrospective analysis. If the appraisal is ordered months after the date of death, the appraiser must perform a retrospective appraisal — using comparable sales available as of the effective date, not current sales. This is standard practice for estate tax appraisals.
• Fair market value definition. The IRS defines fair market value as "the price at which property would change hands between a willing buyer and a willing seller, neither being under any compulsion to buy or sell and both having reasonable knowledge of relevant facts." The appraisal must support this definition with market evidence.
• Detailed property description. Legal description, parcel number, lot size, square footage, year built, condition, and any unique features (pool, casita, view lot, golf course frontage, commercial zoning).
• Comparable sales. At least 3–6 comparable properties sold around the effective date, with adjustments explained for differences in size, condition, location, and amenities.

Desktop appraisals (which rely on public records, MLS data, and exterior observation without an interior inspection) are generally acceptable for residential estate tax appraisals in Arizona, particularly when the property is occupied by heirs or when interior access is difficult to arrange. For properties with significant deferred maintenance, unique improvements, or commercial elements, a full interior inspection may be warranted.

Arizona Estate Planning Timeline: When to Order the Appraisal

IRS Form 706 is due nine months after the date of death, with a possible 6-month extension available by filing Form 4768. In practice, most estate planning attorneys working on taxable estates order appraisals within the first 60–90 days after the date of death to allow time for:

1. Appraisal delivery (1–3 weeks for traditional appraisals, 24–48 hours for desktop appraisals)
2. CPA review and estate tax calculation modeling
3. Alternative valuation date analysis (if the 6-month date might reduce liability)
4. Form 706 preparation and executor review
5. Filing buffer before the 9-month deadline

Pro tip for Arizona attorneys: If there's any possibility of electing the alternative valuation date (6 months after death), order two appraisals — one as of the date of death, and one as of the 6-month date. This gives the CPA both data points to model the tax impact of each election. The incremental cost of the second appraisal ($175 for a desktop) is negligible compared to the potential tax savings.

Common Mistakes That Delay Returns or Trigger Audits

The IRS Estate Tax Examination team routinely audits returns that include high-value real property. These mistakes increase audit risk or cause filing delays:

• Using a broker price opinion (BPO) or comparative market analysis (CMA). The IRS explicitly rejects these. Only a licensed appraisal satisfies Form 706 requirements.
• Using the county tax assessor's value. Assessed values in Arizona are often 10–30% below fair market value due to Prop 117 assessment caps. The IRS will adjust upward and may assess penalties for undervaluation.
• Ordering the appraisal too late. If the appraiser can't find sufficient comparable sales from the effective date (because too much time has passed), the report becomes difficult to defend. Order within 90 days of the date of death.
• Not disclosing unique property features. If the property has a commercial lease, mining rights, water rights, or unusual improvements, the appraiser needs to know. Omitting these can result in a materially incorrect value.
• Mixing effective dates. If you elect the alternative valuation date for one property, you must use it for all estate assets. Executors sometimes mistakenly report some assets at date of death and others at the 6-month date — this triggers an automatic audit.
• Failing to attach the appraisal report to Form 706. The appraisal must be attached as Schedule A or Schedule F documentation. If it's missing, the IRS will request it — and that request delays processing by months.

What It Costs and How to Order

A licensed desktop appraisal for IRS Form 706 estate tax purposes from Next Day Desktop Valuations is $175 flat. That includes:

• USPAP-compliant report with retrospective effective date analysis
• Comparable sales from the effective date (date of death or 6-month alternative date)
• Market conditions adjustment to reflect values as of the effective date
• Signed appraiser certification
• PDF delivery within 24 hours

If you need both date-of-death and alternative-valuation-date appraisals, order both at once — we'll deliver both reports for $300 total ($125 savings vs. ordering separately).

Order online at nextdaydesktops.com/order. Select "Retrospective / Date-of-Death" and specify:

• Effective date of appraisal (date of death or 6 months after)
• Intended use: IRS Form 706 Estate Tax Return
• Any known property features (pool, casita, recent remodel, deferred maintenance)

We'll confirm within the hour and deliver within 24 hours. For rush delivery (same business day), add $75.

Questions about the 9-month window or alternative valuation? Call us at (480) 382-7652 or email appraisals@nextdayaz.com — we work with estate planning attorneys across Arizona and can clarify what the IRS requires.