AUDIT SUCCESS
As a regular feature in our Valuation Briefs Newsletter, we will discuss the highlights of recent Audit Successes our Clients have had as a result of our real estate appraisal and real estate holding company and discount valuation services.
In a 2006 large Estate in the San Diego (OR Southern California) area, our Client died in January 2006, and at the time of his death, his Trust owned a 99% Limited Liability Company (“LLCs”) Interest in four LLCs and 29.278% LLC interest in a corporation, all of which were real estate holding companies. Each of these companies wholly or partially owned fifty-nine (59) properties, that included forty-nine (49) single family rental residences, Multi-family apartment units, a Wahlgreens and Kohl Store, a large shopping center, and a Motel 6.
This appraisal was conducted for federal estate tax purposes and to assist in the filing of the Form 706 (Federal Estate Tax Return) and it required an appraisal all of the underlying income producing real estate owned by the five (5) entities referred to above, a valuation of undivided fractional Tenant-in Common Interests (“TIC Interests”) held by these five entities in other entities or directly in the Subject Properties, and the valuation of the five entities and the community property interest held in each of the entities.
We opined to two levels of combined discounts for the lack of control and the lack of marketability for the undivided fractional TIC Interests held in the underlying real estate (or other entities) at combined discounts of 28% to 32% and for the 49.5% Community Property Interests held by The Trust in the five Subject Entities at combined discounts of 32% to 36%, depending on the many factors analyzed in order to determine the final discounts, including the all important internal rate of return calculations in support of the discounts.
Our work was accepted without adjustments and without the client incurring any additional expenses under audit.
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