Does Fair Value of FLP Include Marketability and Minority Discounts?
The partnership retained a certified public accountant, who relied on a forester’s appraisal of the timberland at just under $1.5 million to arrive at a total fair market value for the FLP of $1.63 million. Because he believed that it was “common” to apply discounts to minority partnership interests, he also applied a 30% discount for lack of control and a 15% discount for lack of marketability. Although he acknowledged that the partnership agreement called for applying “fair value,” in this case the expert believed that the standard was the same as “fair market value.” On cross-examination, he conceded that there could be circumstances—as in dissenting shareholder cases—where “fair value” could require a different valuation method. Trial court applies discounts The trial court found the partners’ appraisal of the FLP assets more credible. It adopted the $1.9 million value as part of its overall valuation of the FLP, but then applied the discounts asserted by the partnership’s expert—a
