You raise a good point. In my initial response I had assumed that you had fairly reliable appraisals and the way the questions was phrased I had assumed that discounts weren't considered so the taxable estate of each decedent would have been somewhat less than the $800,000 (1/2 of $1,200,000). If you have an issue, or think that there might be an issue with regard to valuation, the filing of a 706 would help in this regard. You will obviously need to provide full disclosure with the 706 which would include a valid appraisal including discounts. If property were sold close to date of death this would go a long way toward establishing the gross value of the property. You would still have to deal with discounts. But the filing of a 706 and the receipt of a closing letter would give you some assurance that the values wouldn't be challenged latter on.