The total amount of unpaid principal balance and accrued interest may actually exceed the value of promissory notes
Little know fact
In the first deficit, the fair market value (FMV) of collateral or unsecured promissory note seems to be easily determined. The IRS Treasury Regulation considers its value to be the principal unpaid and the overdue amount up to the accrued interest and valuation date. In order to evaluate the memo less, satisfactory evidence needs to be submitted. Low evidence of evaluation may be one or more factors such as interest rate, payment amount, frequency of payment, duration, collateralized securities, payment history, or borrower credit status.
Eligible promised bills expert witnesses can establish lower value or zero value-less value. If the FMV is low, the taxable evaluation value of the note decreases. This fact is not widely publicized to many CPAs or lawyers, but it is very important for those who pay unnecessary taxes.
Fair market value differs from book value
The book value, cost, accrued remnant are all accurate historical facts. Their accuracy is not controversial. However, FMV (the IRS's preferred definition) is not the "market value" of the note, the current selling price, the past expenses, or the outstanding balance. From these two points of view, we get two values of the same promissory note. There is only one correct value for tax purposes.
Definition of fair market value
The definition defined in IRS Regulation Section 1.170 A - 1 (c) (2) states that "the price that property changes between the seller intending to purchase and the seller who intends to purchase, both of which are reasonable I have knowledge.
Implications of tax
Taxable events can be one of many events. Examples include selling notes, posting notes from traditional IRA accounts to Roth IRA accounts, donating memos, or the value of memos in real estate and trusts. In all of these circumstances, the carrying amount, the carrying amount, or the outstanding balance may differ materially from the current fair market value. Normally, FMV is practically below the book value, effectively reducing taxes.
General conclusion
• The fair market value of the promissory note is usually the unpaid balance plus accrued interest
• IRS calculates many taxes on fair market value, but does not calculate cost or book value.
• Many Certified Public Accountants (CPAs) and lawyers are not aware that promissory notes are not "worth" where displayed. Often they exceed the memo and exceed the tax.
• Evaluation is determined based on definition and evidence.
• Qualified promissory notes appraisers can create fair market value reports that conform to IRS definitions and regulations. The fair market value is usually less than the carrying amount.
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