----- Message from "John
Coonley" <highcut@mchsi.com> on Tue, 18 Jul 2006 09:38:44 -0600
-----
To:
<realestate@iabar.org>
Subject:
Re: Value Discounts
Brad:
I am currently in audit on that issue. My
audit is on a Federal 706 and I have my initial audit conference tomorrow
although I have had some preliminary discussions with the auditor.
My situation is that decedent owned an undivided
1/2 interest in farm land with the other 1/2 owned basically by his children.
Much animosity in the family. We took a discount in excess
of the cost of partition (backed up by an appraisal) and the I.R.S. is
contesting the discount.
I have a list of cases cited by Neil Harl
in his annual farm outlines - if you are interested I will dig them out
for you.
The bottom line at least as far as the I.R.S.
is concerned is that they will concede the cost or partition (their estimate
is 8%) and will fight over more. Not sure if the IDR position is
parallel to IRS position or not.
Has anyone ever taken a lack of control or
lack of marketability discount on an undivided interest in real estate
for purposes of a probate inventory or Iowa inheritance tax return?
Problem is this: Client inherits under
decedent's will an option to purchase an undivided one-half interest in
a farm at "the value fixed in my estate for Iowa Inheritance Tax purposes".
I want to argue that fair market value or value for inheritance tax
purposes of an undivided one-half interest is significantly different than
the fair market value of the whole farm divided by 2.
This has to have been argued before. I
am just taking the easy way out here.
Your thoughts will be appreciated.
I am sending this to both the probate and
real estate boards so if you get two of these I apologize.