What have been my recent experiences with audits of real estate and fractional interest discount valuations?
The best approach to achieving optimum results is with a thorough appraisal. Quality differs greatly and appraisers who may be great at valuing the real estate as a whole may not be effective with fractional discount appraisals. I am pleased that several real estate appraisers have developed a body of what they assert to comparable sales of fractional interests and recognition of the difference between partnership and co-owned interests. Also, the better appraisers distinguish between residential sales and raw land, timberland, commercial or other unique properties. The IRS estate tax attorneys are not consistent in their approach, and I believe that practitioners with greater experience with valuation issues achieve better case resolution, whether in audit or later in the compliance process. Some IRS attorneys continue with safe harbor discounts in the 10-15% range, and want to see an appraisal above those amounts. Others are more flexible. Several recent audits have concluded fractio
