Alternative Valuation Date

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Alternative Valuation Date

Six months after the death of a person subject to the estate tax. If the executor of an estate believes that the value of an estate is declining or will decline, he/she may use the alternative valuation date for purposes of determining the value of the estate. This reduces the estate tax owed. Otherwise, the executor uses the date of the person's death.
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The three obvious alternative valuation dates (i.e., the date on which the option value and corresponding compensation cost are firmly established) are the date the option is initially granted, the date on which all vesting requirements are met, and the date on which the option is exercised.
Table 3: Comparison Option Values Using Alternative Valuation Dates and Methods Valuation date Vesting date Grant date Black-Scholes model Example 2 Example 4 using MRT $4.84 per share $3.93 per share $2,420,000 $1,965,000 Black-Scholes model Example 3 Example 5 using CEL $4.38 per share $3.38 per share $2,190,000 $1,690,000 Intrinsic value Example 1 Example 1 $2.00 per share $0 per share $1,000,000 $0
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