Appraiser for "Valuation Adjustment" on 3-way LLC/ROTH Conversion

[Daniel Dietz]

Hello All, I
I am looking for feedback on two things;

1)The 'concept' of getting a 'valuation adjustment appraisal' on our 3-way LLC that is made up of 3 SOLO401Ks that own rental properties and are currently NOT in 'the ROTH bucket'.

Our general thought is this; We own approximately 400K of property with 250K of loans against it, so 150K equity. Since it is a 3-way any give ownership share dose NOT have  controlling interest and thus less 'saleable on the open market', which in theory makes it worth less to a new potential owner.

In the book "Keep It - Advanced Tax Strategies for IRAs" by Joe Luby (I highly recommend this book) you can have your LLC appraised for an "adjusted valuation" that takes this into account. The idea is that if you would need to take say a 30% discount to 'book value', the LLC shares are now worth 280K instead of 400K, leaving you with a NET of only 30K in equity.

Obviously this would make a HUGE difference to the taxes due upon conversion to a ROTH bucket within our SOLO401K plans. Probably a saving of around 40K in taxes.

2) I am looking for a reference to an Appraiser who has experience in this kind of things, and can work in Wisconsin.

Thanks, Dan Dietz

[Phillip McDonald]

A few cases cited in "Appraising Partial Interests" include John A. Propstra v. United States. Estate of Edgar A. Berg v. Commisioner of Internal Revenue and Samuel Lefrank v. Commisioner.  Each of these cases support a discount applied to fractional interest.

It may be difficult to find an appraiser experienced in fractional interest in your market but if you make enough phone calls you will find one.