https://www.johnsonappraisal.com/wp-content/uploads/2016/08/th-1.jpg 225 300 Chuck Johnson https://www.johnsonappraisal.com/wp-content/uploads/2015/07/logo.png Chuck Johnson2016-08-20 02:23:252016-08-20 02:23:25What is an acceptable discount for fractional interest ~ Partioning
How to value Fractional Interest in Real Estate ~ Partitioning costs.
“How do I divide or value property that is owned as Tenants in common Imagine that you own a property or a parcel of land with another person – a sibling, a friend, or a spouse. But then your interests diverge; you and that person have different ideas about what to do with the property; in particular, how to use, improve, or dispose of it.
Say, for example, one of you wants to build or expand a house, the other wants to start a farm. Or that one of you wants to sell the property, the other wants to maintain it for generations. Perhaps one of you wants to rent it out, the other wants to leave it unoccupied until some future date when it will be sold. Your efforts to negotiate or compromise are getting you nowhere; you’re stalemated.
A partition, or division, of property can be arranged on a voluntary basis if all owners agree to it. However, if they don’t agree, a judge can order a partition of the property based on one owner’s request. If done gracefully and with agreement, it can result in a more efficient splitting of the property where all of the former owners are happier owning their own portion.” This explanation is provided by Brian Farkas, attorney at law. Mr. Farkas is an associate attorney with Goetz Fitzpatrick LLC in New York.
The interesting valuation question arises on how to value fractional interest of real estate. Believe it or not, the IRS accepts partitioning costs in order to calculate discounts for valuation purposes for Real Estate valuations as well. This can be an acceptable way to develop a discount for fractional interest. Something well worth understanding for such as issues as “Tenants in common”. Definitely worth knowing.