EVP Systems' EstateVal, the industry-leading estate valuation software, offers three pricing methodologies, allowing clients to select the one that best meets their needs or their company policy.
"Primary" mode returns "primary exchange prices," where they are available, and falls back to "composite prices" otherwise. "Composite" mode returns "composite prices" in all cases. "Default" mode uses what EVP Systems' considers the best practice, providing primary exchange prices for evaluation dates on and after April 30, 2017, while preserving compatibility with historical evaluation reports that used composite prices.
There is no bias or tax advantage in using one mode over another, and the IRS has not stated a preference.
The ability to select a pricing mode was introduced in EstateVal 8.1.0. All previous versions of the software use the "Default" mode. Most customers will be best served by leaving the mode as "Default," EVP Systems' recommendation.
Treasury Regulation § 20.2031-2 (b) 1 governs which prices are to be used for estate valuations and reads:
If the stocks or bonds are listed on more than one exchange, the records of the exchange where the stocks or bonds are principally dealt in should be employed if such records are available in a generally available listing or publication of general circulation. In the event that such records are not so available and such stocks or bonds are listed on a composite listing of combined exchanges available in a generally available listing or publication of general circulation, the records of such combined exchanges should be employed.
Primary exchange prices are a single pair of values for high/low or ask/bids, from the exchange where the security is "principally dealt." "Composite prices" are an aggregation of the prices for a security across multiple exchanges. Trades, asks or bids from additional exchanges can be slightly higher or slightly lower than on the primary exchange. In practice, there is very little to no variation on most security types.
Composite prices are often freely and widely available on the Web, in the newspaper, and from brokerage statements. Primary exchange prices can be acquired either directly from the exchanges or through data vendors like ICE Data Pricing and Reference Data LLC, which provides EVP Systems with most of its pricing data.
There is no bias or tax advantage in using either pricing type. Across securities and over time, the differences in pricing will average out to zero.
A strict reading of the Regulation and requests from several clients led EVP to switch from using composite prices to primary exchange prices for valuations on and after April 30, 2017. When EstateVal is in "Default" mode, valuation dates before then still use composite prices, to preserve consistency with reports generated in the past. "Primary" mode always uses primary exchange prices, when available, even before April 30; "Composite" mode always uses composite prices, including on and after April 30.
The change caused some confusion with clients (or the clients of clients) who compared the EstateVal report with composite prices from popular web sites. Though the primary exchange prices are valid and accurate, differences between them and composite prices may require an explanation and sometimes conflicted with client's pricing policies. This led to the introduction of the pricing mode selection in EstateVal 8.1.0. EVP Systems clients can now select which methodology best suits their needs.
In most cases, leaving the pricing mode as "Default" is the right choice. It follows EVP's recommendation for best-practice and will match other reports produced with EstateVal in "Default" mode, including those normally generated by the IRS. If, however, client preference or policy requires primary exchange prices when available, or there is a preference for composite pricing, that mode can be selected.
EstateVal versions prior to 8.1.0 will always price in "Default" mode, though this preference can be changed on the server side, on an account by account basis, by contacting the EVP Support Department at firstname.lastname@example.org.
If you have any questions or comments about primary exchange prices, composite prices, or EVP Systems' default best-practice recommendation, please don't hesitate to contact Support.