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We have a Real Estate family partnership. For giving gifts to our children for Estate planning,what discount% we can use ?

Pittsford, NY |

We have established,through a Professional appraisal,our equity. We have two classes of shares ,Voting(25%) & Non voting (75%). My wife & I have the voting . What discount can be applied for : Minority Interest; Lack of Marketability Discount(LOMD) & Non Voting discount.
We are thinking,based on all the cases & other guidelines, a combined discount of 50%.
What is your advice?

Attorney Answers 2

  1. There is an expression in legal fields that "pigs get fat and hogs get slaughtered." I, too, have heard of people taking 50% valuation discounts. I think that is an aggressive posture and you might be asking for an audit. You have a fairly complex arrangement, here, and it does not make sense to do this without consulting a tax attorney to make sure that you handle everything correctly.

    James Frederick

    ***Please be sure to mark if you find the answer "helpful" or a "best" answer. Thank you! I hope this helps. ***************************************** LEGAL DISCLAIMER I am licensed to practice law in the State of Michigan and have offices in Wayne and Ingham Counties. My practice is focused in the areas of estate planning and probate administration. I am ethically required to state that the above answer does not create an attorney/client relationship. These responses should be considered general legal education and are intended to provide general information about the question asked. Frequently, the question does not include important facts that, if known, could significantly change the answer. Information provided on this site should not be used as a substitute for competent legal advice from a licensed attorney that practices in your state. The law changes frequently and varies from state to state. If I refer to your state's laws, you should not rely on what I say; I just did a quick Internet search and found something that looked relevant that I hoped you would find helpful. You should verify and confirm any information provided with an attorney licensed in your state. I hope you our answer helpful!

  2. You should have an appraisal done for both the value and the discounting. I often recommend having the appraisal done every other December so that you can use it December and January.

    THESE COMMENTS ARE NOT LEGAL ADVICE. They are provided for informational purposes only. Actual legal advice can only be provided after consultation by an attorney licensed in your jurisdiction. The answer to question does not create an attorney-client relationship or otherwise require further consultation. Mrs. Cook is licensed to practice law throughout the state of California with offices in San Diego County. She is authorized to handle IRS matters throughout the United States, and is also licensed to practice before the United States Tax Court. IRS CIRCULAR 230 DISCLOSURE: To ensure compliance with requirements imposed by the IRS, please be advised that any U.S. federal tax advice contained in this communication (including any attachments) is not intended or written to be used or relied upon, and cannot be used or relied upon, for the purpose of (i) avoiding penalties under the Internal Revenue Code, or (ii) promoting, marketing or recommending to another party any transaction or matter addressed herein.

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