Every year around this time you may hear from us talking about fair market valuations (FMVs) in blogs, webinars, and newsletters. Rest assured that our frequent iterations on this topic stem from FMVs being a critically important part of your tax-advantaged account.
Are you ready to submit your FMV for the year? Access your client portal at portal.ndtco.com, browse your asset(s) on your main dashboard, and click “Valuate,” or “Take Action” and then “Valuate,” to quickly and securely complete the FMV process via our online form.
A fair market valuation, as the name implies, is the assessed and verified value of an asset that does not carry a publicly available market value. Whereas stocks and precious metals carry consistently accepted and available values in their respective public markets, alternative investment options like real estate and private equity can vary depending on individual circumstances.
NDTCO requires self-directed account holders to submit an FMV for each applicable asset at least once a year…but why? Let’s look at the two primary reasons FMVs are so important.
NDTCO requests FMVs every year from our account holders because the IRS mandates them as a requirement of all plan custodians. The IRS provides a great deal of flexibility in the scope of assets your self-directed IRA, 401(k), or Health Savings Account can hold, but it needs to know the value of any alternative assets held each year as of December 31.
The process of the IRS obtaining an FMV begins with you, the account holder. Depending on the asset type, you must seek the services of a qualified valuator and request valid supporting documentation. Upon submission of this information to NDTCO, we will update your account value accordingly and report the collective FMV of your account on IRS Form 5498 at the end of the tax year. One copy of this form goes to you for your records, and another copy is sent to the IRS.
This satisfies the IRS requirement and keeps your account in compliance, which is essential to protecting the tax benefits inherent to your account(s).
Knowledge is power when it comes to self-directed investing. By knowing the FMV of your account, you can regularly gauge the success of your alternative investment strategy and make educated decisions based on recent performance. For example, if your IRA-owned property appreciates to a desirable level, you could sell it to finance the purchase of multiple new properties or leave it alone. As always with alternative investments, the choice is yours. FMVs can help you make these decisions on an informed basis so you can reach your personal investment goals.
You can view the FMV of your account 24/7 through your client portal at portal.ndtco.com. NDTCO will update the value of your non-public assets anytime we receive updated FMV information from you, while the values of public assets, e.g., precious metals, are updated automatically.
Don’t have an account yet? Complete our simple online new account application to get started in a matter of minutes!