Fractional Interests
Reliable Fractional Interest Valuations
We stay current on issues related to control premiums, discounts, and recent IRS rulings to give you the most accurate valuations.
What Is A Fractional Interest Valuation?
Fractional valuations involve the valuation of a percentage of a person's or entity's ownership in a real estate holding company or operating business entity. This ownership is typically defined as a percentage ownership or as the number of shares in a business entity. Fractional valuations can also involve direct ownership interest in real estate, such as with a Tenancy in Common.
These interests are not appraised simply as a fraction of the value of the entire business entity or holding company. Due to issues such as control and marketability of a fractional minority interest, discounts are required to account for lack of control (DLOC) and lack of marketability (DLOM).
This is an area of increased IRS scrutiny over the past several years. If you have been receiving fractional interest appraisals containing a few pages which simply cite a couple of court case rulings and select a discount, such an appraisal may not hold up to scrutiny in the event of an audit.
We utilize empirical data in developing our discounts for lack of control and lack of marketability, including: publicly-traded partnership data, restricted stock data, pre-IPO data, closed-end fund data, short-term vs. long-term bond horizon data, real estate risk premium calculations, and other data that supports these discounts.
Our Valuation Services Are Conducted for:
- Real estate holding companies
- Operating businesses
- Tenancy in Common interests
- Gift Tax purposes
- Estate planning
- Divorce purposes