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When we talk about fair market value, it is important to understand that it does not refer to the amount paid for the property or what the property was worth at the time of purchase. Fair market value is the value of the property today. For instance, if you inherit a home, the fair market value would be what the home can be sold for today and not the original price the homeowner paid to purchase it.
If you are calculating your inheritance tax, you should first make an endeavor to add up the fair market values of all properties and assets. This includes bank accounts, cash, annuities, retirement funds, stocks, insurance etc. This will give you an amount that is called gross estate value.
In order to find out how much tax you have to pay on your inheritance, you can to calculate net estate value. You can arrive to this figure by adding all adjustments and deductions like mortgages, personal loans, lawyer fees and other administrative expenses. This amount has to be subtracted from the gross estate value and you will arrive to the net estate value.
If the net estate value of your inheritance is more $2 million, you would have to pay an inheritance tax. At the moment, just around 2 percent of the American population pays this tax because not everyone inherits such a large inheritance.
If you file your inheritance tax correctly, the IRS will take around 4 to 6 months to send you a letter informing you that the inheritance has been settled and you can then access what was bequested to you.
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