Timely Filing US Federal Estate Tax Returns: Navigating Trump's Post-Liberation Day Market Crash from an Estate Tax Perspective

If a person who passed away directly owned stocks in publicly traded US companies, like NVIDIA Corporation (“NVDA”), their estate must file a US federal estate tax return. This applies whether or not the person has ever visited the United States. US citizens and domiciliaries file Form 706, while non-US citizens and non-US domiciliaries file Form 706-NA. The estate could face a federal estate tax of up to 40% based on the fair market value of the NVDA shares at the time of the person's death. 

This could be a major problem for the estate if the person died before the stock market crash following Trump's tariffs on Liberation Day. The estate would be liable for US estate tax based on the higher stock values at the time of death, even though the stock prices fell sharply the next day. For instance, NVDA was trading at around US$110 on April 1, 2025, but dropped to below US$95 two days after Liberation Day. 

Fortunately, Section 2032 of the Internal Revenue Code offers a solution for estates facing declining stock values. It allows the estate to value shares at their price six months after the person's death, known as the "Alternate Valuation Date." This can be beneficial if NVDA's stock price has not recovered by the Alternate Valuation Date. 

However, to use the Alternate Valuation Date, the estate must file its tax return by the due date, including any extensions, which is generally within 9 months of the person's date of death. If the return is not filed on time, there is a one-year grace period. The estate can still make the election on the first tax return filed after the deadline, if it is submitted within one year of the original due date, including extensions. 

Although the post-Liberation Day Crash might feel like a big lemon—or perhaps an orange, given its colour—for most portfolios, we can still make lemonade (or orange juice) by using the Alternate Valuation Date. Just be sure to file the US estate tax return on time.