What’s the Fair Market Value of Your Self-Directed IRA?

Published on October 14, 2014

Every year, IRA account administrators are required to file Form 5498 on behalf of its clients, which reports the fair market value of the IRA. With the growing popularity of self-directed retirement plans, the IRS has put these plans more squarely on its radar, and added a box to Form 5498 this year meant for self-directed accounts or “hard to value assets.” This appears to be a signal that the government is interested in tracking non-publicly traded alternative assets (which are invested within these accounts) more closely. This is entirely new to the form and to self-directed investors.

Declare the Fair Market Value of Your Self-Directed IRA

One purpose of Form 5498 is to declare fair market value of an IRA as of December 31st of every year to your IRA custodian. Custodians or administrators in turn have until June 1st of the following year to file the appropriate IRS reports (using Form 5498) on behalf of all its clients’ retirement plans; Participants/clients must also get statements that reflect fair market value of the assets in their retirement plans (custodians/administrators must also provide the report to their clients).

Hire a Third Party Professional to Value Your IRA

In order to correctly report fair market value of the assets within the self-directed account, it is imperative that investors have each separate nontraditional asset professionally valued by a third-party professional; this may be an accountant or CPA, an appraiser (depending on the asset) or a valuator. This valuation must be done by the end of the calendar year (December 31st) so that account administrators can meet the IRS deadlines for reporting. Given the changes to Form 5498, it is very likely that the IRS will become more diligent about requiring these valuations.

Report the Fair Market Value by December 30th

At Next Generation Trust Services, we will be asking clients to report the fair market value of their assets to us no later than December 30th and we will send out requests for this information during the month of October; this will give us ample time to prepare the reports for the IRS. We recommend that anyone who has a self-directed retirement plan consult a tax professional about getting a fair market valuation for their nontraditional assets as soon as possible so their Form 5498 can be filed correctly and on time by their administrator.

Next Generation Trust Can Answer Your Questions About Valuation Requirements of Your Self-Directed IRA

If you have any questions regarding the changes to Form 5498 and the valuation requirements concerning the nontraditional investments in your self-directed IRA, our professionals are always available with the answers. Contact our team at Info@NextGenerationTrust.com or (888) 857-8058. You can read more about Form 5498 and filing rules on the IRS website.


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