Real Estate Holding Companies
Real Estate Holding Company value is different from the sum of their appraised property values. And interests in these companies for settlement, an LLC, LP, GP, or corporation, are different from the fair market value tax value. This is important for dividing estates and partnerships fairly. Tenant In Common interests also need assessment.
Built-in gain tax liability. If the company sold its properties, it would owe tax on the gain. That liability reduces what actually remains for the owners, and it has to be accounted for in the entity's value. This is one factor can move value down by 30%.
Property tax basis. A property held inside an entity may benefit from or be penalized by its assessed value and the ongoing property tax obligations. This is very important for California where tax basis is artificially low for long-term holdings. For this aspect to be in effect, the transaction being valued must not trigger re-assessment.
Ownership structure and distributions. In a typical LLC or LP, the managing partner doesn't receive the same share as the other owners. Managing partners may receive no dividends, a preferential share of annual dividends or a different share of the capital gain on sale, or both. A payment to the general manager for refinancing the company can occur as well. A limited partner's interest is impacted by this structure.
Tenancy in common (TIC) is an ownership arrangement in which two or more parties jointly own property, and yet title is held individually. TIC ownership entitles each owner to the same ownership rights regardless of the equity invested. This feature puts no individual owner, or group of owners, in direct control of the property, and every owner has the same rights as any other.
Valuing the properties alone misses all of these issues. When an estate is being divided fairly among heirs or partners, it's the true value that counts, and each owner's actual position within it.