The initial valuation firm took technical shortcuts that resulted in severely inflated preliminary values. Specifically, the prior firm relied on non-market, inter-party leases—which were well above market rates—to capitalize real estate values, rather than performing independent market appraisals. When challenged, the prior firm incorrectly argued that reducing real estate values would simply create a corresponding offset in the operating businesses’ values.
Marshall & Stevens (M&S) recognized that because the leases were short-term and between related parties, using them as the primary basis for real estate valuation was fundamentally flawed and would not withstand IRS audit scrutiny.
M&S presented the client and their legal team with two strategic pathways:
To ensure an estate tax filing that would strictly “pass muster” with the IRS and protect against potential accuracy-related penalties, the client selected Option 2.
By deploying a multi-disciplinary team of state-licensed, MAI-designated real estate appraisers and corporate valuation specialists, M&S properly uncoupled the related-party leases and valued all underlying real estate and operating entities at true market value.
M&S successfully established a $15,000,000 reduction in taxable estate value for the 20% minority interest—saving the client approximately $6 Million in unnecessary estate tax liabilities while delivering an audit-ready, IRS-defensible report.
Marshall & Stevens has since been engaged multiple times since its initial assignment to provide valuation analyses for additional gifting by family members.
