Fair Market Values (FMVs)
Let's Make this Simple
You may have wondered why your IRA custodian requires a Fair Market Value (FMV) to be completed each year. As explained by the IRS, Fair Market Values are required to comply with the Internal Revenue Code requirements and Title I of ERISA.
A fair market value is a statement of the value of an asset at a given point in time. You can predict the Fair Market Value of a car, for example, by looking it up using the classic Kelly Blue Book tool. You can see the value of a stock by looking up its symbol. With self-directed retirement accounts, asset values may need a little research but must be reported to stay in compliance with retirement account rules.
Unlike a traditional brokerage account in which values are publically accessible, alternative assets can be more difficult to determine a value. As a Self-Directed account holder, you are responsible for ensuring the value reflected for your assets is accurate. And this must be updated at least once every 12 months.
Where do I update the value?
The simplest way to update the value of your asset is by logging into your account.
Click on "Account Details after the relevant account. Under the Account Asset Holdings header, and after the relevant holding click the "Select an Option" dropdown and choose "Update Value."
Add the correct New Price Date (12/31 for year-end values). Update New Price Per Unit and New Units Held if needed. Choose the Valuation Source and add your backup documentation by clicking "Choose File" and then uploading it.
Do I have to update my FMV?
Yes, you do. Fair Market Values are an annual requirement from the IRS for all retirement accounts. This is the one requirement that we have to receive in order to continue to keep your clients’ account in a tax-deferred (or tax-free if a Roth) status. To make the process as streamlined as possible, Equity Trust reaches out every January by email for a report of the annual value of the asset.
When does the value need to be dated?
We ask that the asset’s value be as of 12/31 of the previous year, if possible. However, we understand that this may not always be possible, so if you are unable to provide this date, just reach out, and we will work with you. The requirement forces an asset to become "stale" after 12 months of no change in value, so it needs to be updated annually.
Is there a way to do this without logging into my account?
If you are unable to use your online access, we have a paper form which you can fill out and include with your documentation.
The documentation may be sent in the following ways:
Email fmv@midlandtrust.com
Fax to 239-466-5496
Mail the form to us at 15671 San Carlos Blvd. Fort Myers, FL 33908
What happens if I don't turn in a valuation?
We will follow up with you to be sure you have had a chance to do the update. If you do not respond to our requests, Equity Trust will research the value. However, Equity Trust charges a valuation research fee of $50 for this service. We do not like this job or the fee that goes along with it so we would rather help you find the simplest way to do it yourself to keep your account within IRS regs.
If year-end valuations are not updated, Equity Trust reserves the right to resign as your account custodian.
Do I need a certified appraisal for my real estate asset?
No, there is no reason to go to the expense of an appraisal. The most common documentation used for updating the value of real estate in your IRA is a pdf of your tax bill. See the list below for other possible documents to submit for real estate valuation.
How do I handle zero or unknown valued assets?
Our online portal will not allow you to change a value to zero. While we never want to see this happen, if you feel that your asset is worthless or if the value is unknown due to pending legal or other issues, please contact our office for further assistance. Equity Trust has regulatory requirements for adjusting values on these types of assets so we may require additional information depending on the situation.
I have a Roth IRA, do I still need to do this?
Yes. While there are no personal tax repercussions with a Roth IRA's value, the IRS still requires us to report this value on form 5498.
I have a Single Member LLC. What are my requirements?
We need a valuation for every asset that is held in an LLC, including cash, real estate, brokerage accounts, notes, or anything else that holds value within the LLC. We have an FMV form that is specific for LLC’s, which is the easiest way for you to list each asset. Every asset listed on this sheet must also have backup substantiating the value put on the form.
For cash held in an LLC, we'll need a bank statement, either year-end or most recent, showing the bank account value.
The cash balance that is held in the value of the LLC is a separate “asset” from the LLC and should not be included.
What if the value has not changed? Do I still need to provide a value?
Yes. Even if the value has not changed, we need something stating the price with a current date to show that it stayed the same. A letter from your investment sponsor stating the value has not changed since the last price date will work.
I am an investment sponsor and want to submit my investors' valuations. Is there a form or a way to do this?
If you have just a few investors, you can submit the valuations on your letterhead stating the name and value of each of our mutual client’s investment.
If you would prefer to use a spreadsheet, please send an email to fmv@midlandtrust.com and request a spreadsheet for your investors.
Types of Alternative Investments
Different types of assets offer different documentation to show the value of your holding.
REAL ESTATE
The most common way to update your valuation is with your tax bill, but we can also accept an appraisal, broker opinion letter or even a valuation from Zillow showing the estimated market value.
Closely Held LLC or LP
The Value of each asset in the LLC is required. If your LLC owns real estate, the same standards apply. If you have other assets, such as bank or brokerage accounts, submit the statement for that account that coordinates with your valuation date. A K‐1 is not acceptable as it represents a historical value.
Notes and Mortgages
Typically, the value of a Note is equal to the outstanding principal balance. You only need to provide an updated valuation for notes if the current value differs from what our records show. It is important that you closely review your account statements to ensure the records appear correct, including proper allocation of principal and interest payments received.
PRIVATE PLACEMENTS PRIVATE EQUITY/STOCK
Contact the manager of the private placement and ask how you can obtain a value for your investment. A periodic statement or letter from the manager on company letterhead will suffice, as long as that manager is not yourself or a disqualified person to your IRA.
Problem Assets
For assets that you consider worthless or are in bankruptcy/litigation, provide any documentation you may have at this time. We may contact you regarding additional requirements for updating your account.
Questions?
Feel free to contact us if you have any questions.
(239) 333-1032 ext 114
15671 San Carlos Blvd., Suite 101. Fort Myers, FL 33908
Equity Trust Company is a directed custodian and does not provide tax, legal or investment advice. Any information communicated by Equity Trust Company is for educational purposes only, and should not be construed as tax, legal or investment advice. Whenever making an investment decision, please consult with your tax attorney or financial professional. Equity Institutional services institutional clients of Equity Trust Company. Brokerage Services Available Through ETC Brokerage Services, Member SIPC, and FINRA.