Fair Market Valuation CPA for Real Estate syndication

Member since 2019 · 13 posts · 11 votes

I am trying to locate CPA firms that can complete a Fair Market Valuation (FMV) on a Syndication fund in order to convert my investment from a Tax Deferred account to a Roth account. Do you have recommendations on CPA firms that do FMV's? I am in Colorado, and the syndication fund has investments in multiple states. Thanks.

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Eric Williams

Accountant · Houston, TX · Member since 2023 · 148 posts · 41 votes

Okay I hear ya.

There is an ABV that is accredited by the AICPA.

I have also met CPAs who were accredited with the CVA, and one of them I talked to about how he had to do valuation adjustments for estate purposes. Similar to your situation, sometimes valuations will make reductions for certain interest, such as for effective control, minority interests, lack of marketability, restrictions, etc. This has a similar benefit in that a reduced valuation may reduce estate taxes.

Anyways sorry if that wasn't any help but if I think of anything I'll try to double back.

I also wanted to add, although you probably were already aware, if the interest has multiple units, perhaps spreading the transfer out over several years could help.

Also don't forget about harvesting losses from other sources like brokerage accounts (make sure to avoid wash sale rules) or even carryforward amounts.

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Chris SeveneyBusiness Member
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Investor · VA · Member since 2015 · 21k+ posts · 19k+ votes
2y
Quote from @Steven Medina:

I am trying to locate CPA firms that can complete a Fair Market Valuation (FMV) on a Syndication fund in order to convert my investment from a Tax Deferred account to a Roth account. Do you have recommendations on CPA firms that do FMV's? I am in Colorado, and the syndication fund has investments in multiple states. Thanks.

Your sponsor should do this for you.
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Steven Medina
OP
Member since 2019 · 13 posts · 11 votes
2y
Wouldn't that be a conflict of interest?
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Eric Williams
Accountant · Houston, TX · Member since 2023 · 148 posts · 41 votes
2y
Quote from @Steven Medina:

I am trying to locate CPA firms that can complete a Fair Market Valuation (FMV) on a Syndication fund in order to convert my investment from a Tax Deferred account to a Roth account. Do you have recommendations on CPA firms that do FMV's? I am in Colorado, and the syndication fund has investments in multiple states. Thanks.
Sure you don't need to just give them a K-1 showing your basis?

How to Report the Fair Market Value of Non-Traditional Assets In Your Self-Directed Retirement Account | Self-Directed IRA by CamaPlan
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Steven Medina
OP
Member since 2019 · 13 posts · 11 votes
2y
Eric, the FMV helps to determine the value of the syndication if it were to be sold at that time and it many time is lower than the K-1 which is the initial investment and the depreciation if avail. For conversion to Roth if the FMV is lower then that is advantageous for conversion, i.e. if the investment of $100K is initial, but the FMV comes in at $70K because it is illiquid, no control and not marketable, then the conversion amount is $70K to the Roth.
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Taylor L.
Rental Property Investor · RVA · Member since 2016 · 5k+ posts · 4k+ votes
2y
@Steven Medina I've been wondering this myself lately as well, if you do find answers off of BP please do let us know.
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Chris SeveneyBusiness Member
Moderator
Investor · VA · Member since 2015 · 21k+ posts · 19k+ votes
2y
@Steven Medina
The syndicator is supposed to provide you with the fmv.
We do on our funds - which they also can easily get by running a statement of account.
Does your syndicator not provide statements ?
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Taylor L.
Rental Property Investor · RVA · Member since 2016 · 5k+ posts · 4k+ votes
2y
@Chris Seveney syndicators do provide FMVs, typically for SDIRA annual requirement purposes. The issue is that those FMVs are rarely, if ever, marked to market. Meaning they do not discount to reflect the actual secondary market value for the syndicated security. FMVs from syndicators will often just be the value of the individual's dollar investment in the deal. Not the most accurate valuation for this purpose, where the illiquidity discount is highly relevant.
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Eric Williams
Accountant · Houston, TX · Member since 2023 · 148 posts · 41 votes
2y
Quote from @Steven Medina:

Eric, the FMV helps to determine the value of the syndication if it were to be sold at that time and it many time is lower than the K-1 which is the initial investment and the depreciation if avail. For conversion to Roth if the FMV is lower then that is advantageous for conversion, i.e. if the investment of $100K is initial, but the FMV comes in at $70K because it is illiquid, no control and not marketable, then the conversion amount is $70K to the Roth.

What kind of account is it being held in currently?

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Eric Williams
Accountant · Houston, TX · Member since 2023 · 148 posts · 41 votes
2y
Quote from @Taylor L.:

@Chris Seveney syndicators do provide FMVs, typically for SDIRA annual requirement purposes. The issue is that those FMVs are rarely, if ever, marked to market. Meaning they do not discount to reflect the actual secondary market value for the syndicated security. FMVs from syndicators will often just be the value of the individual's dollar investment in the deal. Not the most accurate valuation for this purpose, where the illiquidity discount is highly relevant.
Yeah the only people I can think of are called CVAs. They often do estate valuations and adjustments for deemed control and lack of marketability.

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Steven Medina
OP
Member since 2019 · 13 posts · 11 votes
2y
Quote from @Taylor L.:

@Steven Medina I've been wondering this myself lately as well, if you do find answers off of BP please do let us know.

Taylor, I am trying the BP route to see who does FMV's as well as working with the syndication fund to find a good CPA that does these. we have one out of Cincinnati, but want to find more to create a process with the ability to have multiple LPs use the FMV to help in their conversions from Tax Deferred to Roth. I will circle back when we finalize.

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Steven Medina
OP
Member since 2019 · 13 posts · 11 votes
2y
Quote from @Eric Williams:

Quote from @Steven Medina:

Eric, the FMV helps to determine the value of the syndication if it were to be sold at that time and it many time is lower than the K-1 which is the initial investment and the depreciation if avail. For conversion to Roth if the FMV is lower then that is advantageous for conversion, i.e. if the investment of $100K is initial, but the FMV comes in at $70K because it is illiquid, no control and not marketable, then the conversion amount is $70K to the Roth.

What kind of account is it being held in currently?

Eric, thanks for your help. As I understand it, there are business valuation experts that are Accredited in Business Valuation (ABV) credentialed and then there is another level that some CPA's perform FMV's that are used for situations like real estate syndications or syndication funds. We have found one CPA that does this in OH, and have another call with one this am. Seems like there should be more out there and that's the reason I am checking with folks on BP also. It is currently in a tax deferred solo 401K account.
0 Reply
Eric Williams
Accountant · Houston, TX · Member since 2023 · 148 posts · 41 votes
2y
Okay I hear ya.

There is an ABV that is accredited by the AICPA.

I have also met CPAs who were accredited with the CVA, and one of them I talked to about how he had to do valuation adjustments for estate purposes. Similar to your situation, sometimes valuations will make reductions for certain interest, such as for effective control, minority interests, lack of marketability, restrictions, etc. This has a similar benefit in that a reduced valuation may reduce estate taxes.

Anyways sorry if that wasn't any help but if I think of anything I'll try to double back.

I also wanted to add, although you probably were already aware, if the interest has multiple units, perhaps spreading the transfer out over several years could help.

Also don't forget about harvesting losses from other sources like brokerage accounts (make sure to avoid wash sale rules) or even carryforward amounts.
2 Reply
Steven Medina
OP
Member since 2019 · 13 posts · 11 votes
2y
Thanks Eric, I appreciate your insights and the CVA info too. Be well!
1 Reply
David Buerer
Member since 2023 · 1 post · 0 votes
2y
Quote from @Steven Medina:

Thanks Eric, I appreciate your insights and the CVA info too. Be well!

Steven... who did you end up going with? I need this for the exact same reason

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Chris SeveneyBusiness Member
Moderator
Investor · VA · Member since 2015 · 21k+ posts · 19k+ votes
2y
Quote from @Taylor L.:

@Chris Seveney syndicators do provide FMVs, typically for SDIRA annual requirement purposes. The issue is that those FMVs are rarely, if ever, marked to market. Meaning they do not discount to reflect the actual secondary market value for the syndicated security. FMVs from syndicators will often just be the value of the individual's dollar investment in the deal. Not the most accurate valuation for this purpose, where the illiquidity discount is highly relevant.

I would think there audited financials would mark to market the asset since they plan on exiting it at a future date.
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