A discussion of who the partners are and what they are likely to do in the future is an essential part of a valuation of a fractional interest in real estate, advises Dennis Webb (Primus Valuations). For over 25 years, Webb has been specializing in valuing fractional interests and asset holding companies, and he spoke during a recent BVR webinar. The IRS will challenge a valuation that does not address the partners, which is a “huge issue” in these types of entities, he noted. The IRS will not be satisfied if the valuation merely assumes a generic situation that does not examine the other partners and their intentions. He recalled consulting with an IRS examiner about a valuation (not Webb’s valuation or client) that did not have this discussion in the report, and it ended up costing the client.
Webb is the author of Valuing Fractional Interests in Real Estate 2.0, and he also offers an online software application (a free trial is available).