For a properly structured buy-sell agreement, what is established for taxation purposes at the date of death?

The correct response highlights the significance of establishing the valuation of the business or property at the date of death in the context of a buy-sell agreement. This valuation is crucial because, for taxation purposes, the IRS requires that assets transferred at death be assessed at their fair market value. This means that the value of the business or property directly impacts the estate's overall value and, consequently, the estate tax liability.

Properly structured buy-sell agreements often include provisions that detail how valuation will be determined, typically via methods like appraisals or specific formulas, to ensure that all parties are treated fairly and that tax implications are considered. Establishing this value at the date of death also helps in the equitable distribution of assets among heirs and may aid in avoiding disputes among stakeholders.

Understanding this concept is vital for planners as it affects both the liquidity of the estate and the potential tax burden on the beneficiaries, influencing overall estate planning strategies.