Posted by John K Haslach, CPA, MST on November 13, 2004 at 05:09:14:
For estate tax purposes, what the operating agreement says does not matter. You would have to read the sections of the operating agreement to see what it refers to, but it is not for valuation for estate tax purposes. Book value generally would be purchase price plus additions less book depreciation.
fair market value as per LLC - Posted by hollis4
Posted by hollis4 on November 11, 2004 at 14:47:48:
My Lawyer who is pretty good at most things seems to be confused as to the term Fair Market Value as its outlined by my LLC operating agreememt.
In it it states: …For purposes hereof, the fair market value shall be the “book value” of the company as then determined by its accountant or other individual who prepares its income tax returns, using generally accepted accounting principals…I’ve had the lawyer that is representing the estate of my deceased partner say “we have to get a new appraisal and determin the new fair market value.” However two accountants say that the BOOK value will be the purchase price plus any improvements. (seems like my LLC lawyer also are saying this, and aying thats the good thing about an LLC death transfer ) My lawyer seems to be non plused. Anyone here ever have to deal with this?
Re: fair market value as per LLC - Posted by John K Haslach, CPA, MST
Posted by John K Haslach, CPA, MST on November 12, 2004 at 12:00:42:
For estate tax purposes, the fair market value would most likely differ from the book value and you will need an appraisal. Because appraisals can differ widely, it important to deal with someone who is familiar with your situation and the ramifications
Re: fair market value as per LLC - Posted by Mark Reynolds
Posted by Mark Reynolds on November 13, 2004 at 22:36:25:
With all due respect I’m not sure you read the question closely, Mr. Haslach (although I’m not sure its written all that well either). The poster is asking about buying his dead partner out of the LLC. The LLC agreement says that under such circumstances the surviving member can purchase the interest of the deceased for “1/2 the Fair Market Value of the LLC” (you wouldn’t have gotten this from this post but this guy has been asking this question all over the web). The agreement also states that in such circumstances FMV is equal to Book Value. While I agree that method would not be acceptable for a normal estate tax valuation that is not the question. The question is whether the LLC agreement means what it says when it says FMV=Book.
My guess is that it does. And since the agreement sets a value for the interest which this fellow intends to accept and exercise then the value in the estate is equal to the buy-out price.
I think that the provision was ill advised but I don’t think its so unfair that a court is likely to overturn the obvious meaning of the agreement. After all, there was a 50/50 chance that it could have been the poster in the box and his relatives complaining about this provision.
Re: fair market value as per LLC - Posted by hollis
Posted by hollis on November 12, 2004 at 18:37:19:
Thank you John,…In this case the operating agreement stipulates that the “book value” will be used. I’ve been told that book value is Purchase price plus any improvements another person said it was PP minus depreciation…have you seen and reference to what it really is?