Definitions

For business valuation appraisal purposes, the market value of 100% ownership of a business enterprise is defined in accordance with I.R.S. Revenue Ruling 59-60 as: "the price at which the property would change hands between a willing buyer and a willing seller when the former is not under any compulsion to buy and the latter is not under any compulsion to sell, both parties having reasonable knowledge of relevant facts." Court decisions frequently state, in addition, that the hypothetical buyer and seller are assumed to be able, as well as willing, to trade and to be well informed about the property and concerning the market for such property.

Minority Interest and Marketability Discounts

When valuing a minority ownership interest, we first determine the market value of a 100% ownership interest. Once a 100% ownership interest market value is determined, the appropriate adjustments (discounts and premiums), are taken to reflect minority positions.

The appraiser arrives at 100% market value by adding the market values the assets of each ownership unit and subtracting the liabilities of each ownership unit. The market value of each of the component assets is determined separately and, in general, represents a cash equivalent value that is realizable within a period of one to two years typically for a real estate component with significantly less time for the marketable securities and cash.

From the 100% ownership interest net market value, we then examine all discounts which may pertain to the limited partnership interest to determine if minority and lack of marketability discounts are applicable.