Estate of James Barudin, Muriel B. Clarke v. Commissioner , 1996 T.C. Memo. 395 ( 1996 )

T.C. Memo. 1996-395UNITED STATES TAX COURT
ESTATE OF JAMES BARUDIN, DECEASED, MURIEL B. CLARKE, EXECUTRIX,
Petitioner v. COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 7156-94. Filed August 26, 1996.
Jeffrey M. Novick, Richard S. Kestenbaum, and Bernard S.
Mark, for petitioner.
Dante D. Lucas and Pamela L. Cohen, for respondent.
MEMORANDUM FINDINGS OF FACT AND OPINION
SWIFT, Judge: Respondent determined a deficiency of
$163,751 in the Federal estate tax of the Estate of James Barudin
(decedent).
- 2 -
Unless otherwise indicated, all section references are to
the Internal Revenue Code as of December 31, 1989, the date of
decedent's death.
After settlement of some issues, the only issue for decision
is the proper date-of-death value of decedent's ownership unit in
a partnership that owned real property in New York City.
FINDINGS OF FACT
Some of the facts have been stipulated and are so found.
At the time the petition was filed, petitioner's legal
residence was in New York, New York.
The 225 Fourth Co. Partnership
In 1954, a group of investors including decedent organized a
general partnership under the laws of the State of New York by
the name of The 225 Fourth Co. Partnership (the FC Partnership)
for the purpose of purchasing two commercial office buildings and
land located at 225 and 233 Park Avenue South, Manhattan,
New York (the Partnership Properties).
The Partnership Properties occupy the entire block on the
east side of Park Avenue South between East 18th Street and East
19th Street. The Partnership Properties are located in a
neighborhood of Manhattan referred to as Midtown South.
Generally, office space that is located in Midtown South and that
is available for lease is regarded as secondary, as opposed to
primary, office space.
- 3 -
The only significant assets of the FC Partnership consist
of the Partnership Properties.
As of 1981, investors owned a total of 48 general
partnership units (ownership units) in the FC Partnership.
Decedent owned one ownership unit in the FC Partnership.
Under the terms of the partnership agreement, ownership
units could not be sold or transferred without consent of a
majority of the partners. In order to sell or mortgage the
Partnership Properties, consent of two-thirds of the partners was
required.
Loans or mortgages obtained on the Partnership Properties
were to be nonrecourse as to the general partners. The general
partners, however, could be required to contribute to the FC
Partnership additional capital for any purpose approved by a
majority of the partners.
Since organization of the FC Partnership in 1954 until the
date of trial, the FC Partnership and the Partnership Properties
have been managed by Orda Management Corp. (Orda Management).
Orda Management was responsible for making improvements to and
repairs on the Partnership Properties, for negotiating leases of
the Partnership Properties, for hiring brokers, attorneys, and
accountants, for obtaining casualty and liability insurance on
the properties, and for managing the general business affairs of
the FC Partnership.
- 4 -
From approximately 1979 until the date of trial, Morton
Silver (Mr. Silver) has owned and functioned as president of Orda
Management. Apparently, from its organization in 1954,
Mr. Silver also has owned ownership units in the FC Partnership.
From at least 1954 through 1981, space in the Partnership
Properties was generally leased out for light manufacturing and
industrial purposes.
By 1981, the two buildings located on the Partnership
Properties were old and in poor condition, and they did not
command lease rates as high as other typical secondary office
space in Midtown South. In 1981, the FC Partnership realized net
income of approximately $300,000 from rental of the Partnership
Properties.
In 1981, the City University of New York (CUNY) agreed to
lease four floors of the Partnership Properties consisting of
approximately 88,000 square feet for office and classroom space.
CUNY's lease, for a term of 10 years, was to begin in the summer
of 1982 and was due to expire in the spring of 1992. As part of
the lease agreement with CUNY, the FC Partnership agreed to
renovate the lobbies of the two buildings and the four floors to
be leased by CUNY and recouped portions of these capital
expenditures through the annual lease charges to CUNY.
In January of 1982, a capital contribution of $4,895,833 was
made to the FC Partnership by Silver-Park Co. (Silver Park), a
New York limited partnership of which Mr. Silver was the general
- 5 -
partner. This $4,895,833 capital contribution was made to fund
necessary repairs and renovations to upgrade the Partnership
Properties.
As a result of Silver Park's $4,895,833 capital contribution
in 1982, Silver Park became a general partner in the FC
Partnership, and the FC Partnership's ownership structure was
changed in 1982 to consist of 95 ownership units, of which the
original general partners owned 48 units, or 50.53 percent, and
Silver Park owned 47 units, or 49.47 percent.
As a result of the change in ownership of the FC
Partnership, decedent's one-forty-eighth interest in the FC
partnership was converted to a one-ninety-fifth interest.
As sole general partner of Silver Park, Mr. Silver was able
to vote on FC Partnership matters on behalf of 47 of the 95
ownership units. As of 1986, Mr. Silver controlled an additional
seven ownership units, giving him control of 54 of the total 95
ownership units. By controlling a majority of the ownership
units in the FC Partnership, Mr. Silver alone had authority to
determine to whom partners could transfer ownership units, and he
could make most decisions affecting management and operation of
the FC Partnership.
By 1984, the FC Partnership had executed two additional lease
agreements with CUNY. The leases with CUNY involved approximately
40 percent of the total office space available in the Partnership
Properties.
- 6 -
The leases with CUNY were due to expire in 1992, 1993, and
1994. CUNY, however, could terminate the leases in 1990 provided
CUNY gave 12 months' advance notice. Further, if, for any year,
CUNY's budget was not approved, CUNY's leases with the FC
Partnership would automatically terminate on the last day of
CUNY's current fiscal year.
In addition to CUNY, other tenants of office space in the
Partnership Properties included Manufacturers Hanover Trust Co.,
Crown Books Corp., American Skandia Life Assurance Corp., STV
Seellye Stevenson Value & Knecht, and Guardian Life Insurance Co.
of America. During 1988, of the 555,015 square feet in the
Partnership Properties, 535,635 square feet (or 97 percent) were
leased.
From 1982 through 1988, lease income from the Partnership
Properties increased each year.
In 1989, total lease income of $16,058,359 was received from
the Partnership Properties. Of this amount, $2,091,410
represented payments the tenants as a whole were charged with
respect to capital expenditures the partnership had made on
renovating the Partnership Properties.
Cash distributions to each partner of the FC Partnership
increased from approximately $10,000 per ownership unit in 1982
to approximately $40,000 per ownership unit in 1986.
In each of the succeeding 3 years (namely, 1987, 1988, and
1989), regular cash distributions to each of the partners of the
- 7 -
FC Partnership remained at $40,000 for each ownership unit.
In July 1988, when the New York City real estate market was
thriving, the FC Partnership refinanced its mortgage on the
Partnership Properties. As a result of additional funds that
were available to the FC Partnership from this refinancing, the
FC Partnership made a special cash distribution of $140,000 to
each general partner with respect to each ownership unit in the
partnership.
In 1988, for purposes of refinancing its mortgage, the FC
Partnership obtained from Cushman & Wakefield, Inc. (C&W), an
appraisal of the Partnership Properties (1988 C&W report). Using
for its methodology comparable sales and income capitalization
and assuming that economic conditions and the New York City
commercial real estate market would continue to improve, the 1988
C&W report concluded that, as of May 9, 1988, the estimated fair
market value of the underlying Partnership Properties equaled
$110 million. The 1988 C&W report did not attempt to value the
FC Partnership, nor an ownership unit in the FC Partnership.
In the spring of 1989, Mr. Silver was informed that CUNY had
decided to build its own campus and that when the new campus was
completed in 1994, CUNY would terminate a large portion of its
lease of the Partnership Properties.
During the early and mid-1980's, real estate leasing
activity in midtown Manhattan increased each year.
- 8 -
In 1987 and 1988, although lease rates for prime office
space in midtown Manhattan rose slightly each year, lease rates
remained relatively the same for secondary office space.
During these same years, vacancy rates for both primary and
secondary office space in midtown Manhattan increased.
By 1989, real estate leasing activity in midtown Manhattan
declined. By the end of 1989, New York City's economy was
experiencing a recession.
Decedent's Assignment of Ownership Unit
In January of 1986, decedent assigned to his daughter,
Muriel Clarke, a remainder interest in his one ownership unit in
the FC Partnership, retaining for the remainder of his life all
income, dividends, and distributions received in connection with
this ownership unit.
On April 15, 1986, decedent filed a Federal gift tax return
with respect to the assignment to his daughter of a remainder
interest in his one ownership unit in the FC Partnership. Using
a liquidation value for the FC partnership of $19,953,778 and a
20-percent minority interest discount, and computing the value of
the remainder interest assigned to his daughter at 82 percent of
the $168,421 value computed for the ownership unit, the remainder
interest in the ownership unit that decedent assigned to his
daughter in 1986 was valued on decedent's 1986 Federal gift tax
return at $146,302.
- 9 -
Estate Tax Return and Respondent's Audit
As indicated, decedent died on December 31, 1989.
In spite of decedent's April 1986 assignment to his daughter
of a remainder interest in his ownership unit in the FC
Partnership, petitioner agrees that, for Federal estate tax
purposes and pursuant to section 2036(a)(1), the date-of-death
value of decedent's ownership unit in the FC Partnership is
includable in decedent's gross estate. Accordingly, on
petitioner's Federal estate tax return, the ownership unit was
included in decedent's gross estate at a December 31, 1989, date-
of-death value of $280,000. The record does not reflect how the
$280,000 date-of-death value was calculated.
On audit of petitioner's Federal estate tax return,
respondent determined that decedent's ownership unit in the FC
Partnership should be included in decedent's gross estate at a
December 31, 1989, date-of-death value of $721,960.
Prior to trial, both petitioner and respondent revised their
respective assertions for the December 31, 1989, date-of-death
value of decedent's ownership unit in the FC Partnership.
Petitioner now asserts that the date-of-death value of decedent's
ownership unit equaled $200,000, and respondent asserts that the
date-of-death value of decedent's ownership unit equaled
$596,000.
- 10 -
OPINION
Generally, the fair market value of property transferred by
a decedent with respect to which the decedent retains for life
the right to income from the property is includable in the gross
estate. Sec. 2036(a)(1). Fair market value is defined generally
as "the price at which the property would change hands between a
willing buyer and a willing seller, neither being under any
compulsion to buy or to sell and both having reasonable knowledge
of relevant facts." United States v. Cartwright, 411 U.S. 546,
551 (1973); sec. 20.2031-1(b), Estate Tax Regs.
In determining the fair market value of property includable
in a decedent's gross estate, we are to consider all relevant
facts and circumstances. Cartwright v. United States, 457 F.2d
567, 571 (2d Cir. 1972), affd. 411 U.S. 546 (1973); Estate of
Andrews v. Commissioner, 79 T.C. 938, 940 (1982); sec. 20.2031-
1(b), Estate Tax Regs.
In determining the fair market value of decedent's ownership
unit in the FC Partnership, petitioner's and respondent's expert
witnesses agree that discounts are appropriate to reflect the
minority status and the lack of marketability of decedent's one
ownership unit. See Richardson v. Commissioner, 151 F.2d 102,
105 (2d Cir. 1945), affg. a Memorandum Opinion of this Court
dated Nov. 30, 1943; Estate of Newhouse v. Commissioner, 94 T.C.
193, 249 (1990); Harwood v. Commissioner, 82 T.C. 239, 267-268
- 11 -
(1984), affd. without published opinion 786 F.2d 1174 (9th Cir.
1986); Mandelbaum v. Commissioner, T.C. Memo. 1995-255, affd.
without published opinion 91 F.3d 124 (3d Cir. 1996); Moore v.
Commissioner, T.C. Memo. 1991-546.
Petitioner's and respondent's experts use similar basic
steps to value decedent's ownership unit in the FC Partnership.
The experts: (1) Estimate the December 31, 1989, fair market
value of the underlying Partnership Properties; (2) convert that
value into a partnership liquidation value; (3) divide the
partnership liquidation value by 95 to calculate the liquidation
value of decedent’s one ownership unit; and (4) apply their
respective combined minority-interest and lack-of-marketability
discounts to the liquidation value of decedent's one ownership
unit.
The major points of disagreement between petitioner's and
respondent's experts relate to the fair market value of the
underlying Partnership Properties and to the amount of the
discounts to apply that would approximately reflect the minority
status and lack of marketability of decedent's ownership unit.
The schedule below summarizes each of the experts'
valuations of the underlying Partnership Properties as of
December 31, 1989, the discounts they apply, and their respective
ultimate date-of-death valuations of decedent's ownership unit in
the FC Partnership:
- 12 -
Valuation of Partnership Petitioner's Respondent's
Properties Before Discounts: Expert Expert
Estimated Gross Annual Lease Income $15,082,200 $16,345,491
Contingency Loss Reserve 5% 1%
Operating Expenses $6,650,193 $6,920,501
Estimated Annual Lease Income $8,432,007 $9,424,990
Capitalization Rate 8.5% 7.9%
FMV of Partnership Properties $100,000,000 $120,000,000
Less Partnership Liabilities $41,595,787 $41,595,787
FC Partnership Net Liquidation Value $58,404,213 $78,404,213
Per-Unit Liquidation Value $614,781 $825,307
Discounts For:
Minority Interest -- 15%
Lack of Marketability -- 15%
Combined Discount 67.5% 28%
FMV of Decedent's Ownership Unit: $200,000 $594,221
In estimating gross annual lease income of $15,082,200,
petitioner's expert takes into account lease income received from
comparable properties in Midtown South and leases executed by the
FC Partnership proximate in time to December 31, 1989. In
estimating operating expenses of $6,650,193, petitioner's expert
considers operating expenses in prior years, operating expenses
of comparable buildings, and various market studies. Taking into
account a 5-percent contingency loss for vacancies and
noncollection of rent and the above-estimated operating expenses,
petitioner's expert estimates annual net lease income from the
properties of $8,432,007.
Petitioner's expert then capitalizes estimated annual net
lease income by an 8.5-percent capitalization rate, which
provides a fair market value for the Partnership Properties of
- 13 -
$100 million ($8,432,007 divided by 8.5 percent equals
$99,200,082, rounded to $100 million). Petitioner's expert
chooses the 8.5-percent capitalization rate from the 5.9- to 9.2-
percent capitalization range reflected in the 1988 C&W report.
In his opinion, use of a high capitalization rate (namely, 8.5
percent) is particularly appropriate because of the economic
recession and poor commercial real estate environment that
existed in New York City in December of 1989.
From the $100 million estimated fair market value of the
Partnership Properties, petitioner's expert then subtracts
FC Partnership liabilities of $41,595,787 and calculates a net
liquidation value for the FC Partnership of $58,404,213 and a
pre-discount net liquidation value for each ownership unit in the
FC Partnership of $614,781 (1/95 of $58,404,213 equals $614,781).
In determining his combined minority and lack-of-
marketability discounts of 67.5 percent, petitioner's expert
relies primarily on a July 1989 sale to Mr. Silver for $125,000
of a fractional 62.5-percent interest in a single ownership unit
in the FC Partnership. Petitioner's expert calculates that the
$125,000 sale price for a 62.5-percent interest in a single
ownership unit reflected a 67.5-percent discount from the
$614,781 liquidation value of a single ownership unit.1
1
In December of 1985, two individuals inherited ownership of
fractional interests in a single ownership unit in the FC
(continued...)
- 14 -
Petitioner's expert also relies on certain market studies that
would indicate combined discounts for minority interests and lack
of marketability of between 30 and 60 percent.
Respondent's expert concludes that looking ahead from the
December 31, 1989, date-of-death valuation date to the years
following 1989, lease income from the Partnership Properties
would likely increase and the Partnership Properties would likely
increase in value. Respondent's expert estimates gross lease
income for the first year of $16,345,491 and increases this
figure by 5 percent per year over a projected 12-year period,
with a 1-percent contingency loss reserve to reflect vacancies
and collection losses. Respondent's expert also estimates that
operating expenses in the first year of his analysis would equal
$6,920,501, and respondent's expert increases estimated operating
expenses by 5 percent per year in his cash-flow analysis.
Respondent's expert then capitalizes his 12-year cash-flow
projection using a capitalization rate of approximately 7.9
1
(...continued)
Partnership -- one individual inherited 62.5 percent of the unit
and the other inherited 37.5 percent. In July of 1989, for
reasons not made clear in the record, the first individual sold
to Mr. Silver his 62.5-percent interest in the ownership unit for
$125,000. The record is incomplete with regard to significant
aspects of this transaction.
- 15 -
percent reflecting his assumption that leasing activity and
market rental rates would increase, and respondent's expert
concludes that the December 31, 1989, fair market value of the
Partnership Properties equals $120 million (respondent's expert's
estimated annual lease income of $9,424,990 divided by 7.9
percent equals $119,303,671, rounded to $120 million).
Using $120 million as the December 31, 1989, value of the
underlying Partnership Properties, respondent's expert subtracts
FC Partnership liabilities of $41,595,787 and calculates that the
1989 liquidation value of the FC Partnership was $78,404,213 and
that the pre-discount liquidation value of each ownership unit in
the FC Partnership equals $825,307 (1/95 of $78,404,213 equals
$825,307).
Respondent's expert acknowledges that, as of the end of
1989, New York City was in the midst of a recession and banks had
become considerably more conservative in their real estate
lending practices, and it was anticipated that the New York City
commercial real estate market would have difficulty recovering
from the economic recession. Respondent's expert, however, fails
to adequately take these factors into account in his
computations.
In our opinion, petitioner's expert more accurately takes
into account the above factors, and petitioner's expert properly
concludes that the value of the Partnership Properties declined
- 16 -
from their May 1988 value of $110 million as set forth in the
1988 C&W report. The $110 million valuation reflected in the
1988 C&W report was based on rapid economic growth experienced in
prior years, the assumption that such rapid economic growth would
continue, and an anticipated steady improvement in the market for
leased office space. Those assumptions were no longer accurate
as of December 31, 1989.
In light of the recession in New York City's economy and the
poor condition of the New York City commercial real estate market
at the end of 1989, we believe respondent's expert errs in using
estimates for lease income from the Partnership Properties that
reflect increases of 5 percent per year.
With respect to the vacancy and noncollection of rent, by
the end of 1989, CUNY, which leased 40 percent of the office
space in the Partnership Properties, had notified the partnership
that it would not likely renew any significant portion of its
leases of office space in the Partnership Properties upon the
scheduled expiration of its leases in 1992, 1993, and 1994. In
light of the decline in economic conditions that was apparent at
the end of 1989, and in light of CUNY's likely nonrenewal of its
leases, we conclude that a 5-percent contingency loss for vacancy
and noncollection of rent is appropriate.
With regard to the estimate of operating expenses, because
petitioner's expert used the lower figure of $6,650,193 to
- 17 -
estimate operating expenses, as opposed to the $6,920,501
estimate respondent's expert used, we use petitioner's expert's
figure.
With respect to the appropriate capitalization rate to be
used in determining the 1989 value of the Partnership Properties,
based on New York City's economic condition as of December 31,
1989, and the evidence indicating that lease rates for commercial
office space would not likely increase for a number of years, we
believe that application of an 8.5-percent capitalization rate
more accurately reflects the December 31, 1989, New York City
real estate investment environment.
At trial, respondent's expert acknowledged that with regard
to comparable sales (used in his report for corroboration of his
calculation of fair market value), adjustments for date of sale,
size, condition, and use of the buildings would be appropriate.
Respondent's expert, however, does not make any such adjustments
in his calculations.
Respondent's expert considers three properties sold
approximately 3 years prior to December of 1989, two properties
sold approximately 1 year prior to December of 1989, and one
property sold 5 months after December 1989. These properties
were located in different neighborhoods throughout New York City.
Each was substantially smaller than the Partnership Properties
and sold for significantly less than respondent's expert's
- 18 -
estimated $120 million valuation of the Partnership Properties.
Because respondent's expert does not make any adjustments for
date of sale, location, condition, or size of the property, we do
not find his comparable sales analysis persuasive.
After considering all relevant facts and circumstances and
taking into account the expert opinions submitted to us, we
conclude that the date-of-death value of the underlying
Partnership Properties equaled $100 million, as reflected in
petitioner's expert witness report. This value, as of
December 31, 1989, is particularly supported by the economic
recession that New York City was experiencing, by the weak
commercial real estate market, and by CUNY's notification of the
likely termination in the early 1990's of a major portion of its
lease of office space in the Partnership Properties.
As indicated above, with respect to discounts for minority
interest and lack of marketability, petitioner's expert applies a
combined discount rate of 67.5 percent to his $614,781 per-unit
liquidation value for each ownership unit in the FC Partnership,
relying primarily on the July 1989 sale to Mr. Silver of a
fractional 62.5-percent interest in a single ownership unit in
the FC Partnership.
Respondent's expert relies on various market studies that
indicate a discount of approximately 19 percent for minority
interests. Respondent's expert believes that an owner of a unit
in the FC Partnership could effectively participate in management
- 19 -
of the FC Partnership, and respondent's expert concludes that the
appropriate minority interest discount of only 15 percent
applies.
With respect to the discount for lack of marketability,
respondent's expert also relies on various market studies which
indicate appropriate discounts of between 25.8 and 45 percent for
lack of marketability. Because the FC Partnership appeared to
have been well managed, made regular cash distributions, and had
quality tenants, respondent's expert concludes that a 15-percent
discount for lack of marketability is appropriate. Combining the
two discounts, respondent's expert uses a 28-percent discount to
calculate the December 31, 1989, fair market value of decedent's
ownership unit. Applying this 28-percent discount to the
$825,307 per-unit liquidation value that respondent's expert
calculates for each ownership unit, respondent's expert concludes
that the date-of-death value of decedent's ownership unit equals
$594,221.
In our opinion, with regard to the appropriate minority
interest discount to apply, respondent's expert erroneously
assumes that an owner of each general partnership unit could
participate meaningfully in management of the FC Partnership.
Since Mr. Silver controlled a majority of the FC Partnership
units, he had practical control over management and operation of
the FC Partnership, and holders of minority interests in the FC
Partnership would have only limited veto power over the few
- 20 -
partnership matters for which a two-thirds vote was required and
then only if the minority partners voted as a block against
Mr. Silver.
Although, under New York State law, any general partner of
the FC Partnership arguably had the legal authority to dissolve
the partnership, see N.Y. Partnership Law sec. 62(1)(b) (McKinney
1988); see also Estate of Bischoff v. Commissioner, 69 T.C. 32,
49 (1977), we believe that such authority would have little
impact on Mr. Silver's effective control of the FC Partnership.
We note that neither expert considered this arguable authority in
determining a minority interest discount.
The various market studies presented in the experts' reports
indicate that purchasers of business interests whose principal
assets consist of real property typically apply a discount of
approximately 19 percent where they are purchasing minority
interests in the businesses and would have little voice in
management of the businesses. As indicated above, an owner of a
single unit in the FC Partnership effectively would have no voice
in management of the FC Partnership.
We conclude that in this case it is appropriate to apply a
minority interest discount of 19 percent to decedent's ownership
unit in the FC Partnership.
With regard to the discount for lack of marketability, it is
clear that a single ownership unit in the FC Partnership was not
readily marketable and that any hypothetical purchaser would
- 21 -
demand a significant discount to account for that fact. Market
studies admitted into evidence indicate that appropriate lack-of-
marketability discounts often fall in a range of 25.8 to 45
percent. Certainly, the consistent history of significant cash
distributions and the history of quality management of the FC
Partnership would make the partnership an attractive investment.
There still existed, however, no public market in which to sell
ownership units in the FC Partnership, and transfer of a unit
would be subject to the approval of Mr. Silver, as owner of the
controlling units of the FC Partnership.
Because the FC Partnership was well managed and made
consistent and significant annual cash distributions, we conclude
that the appropriate discount to use in this case to reflect lack
of marketability of decedent's ownership unit in the FC
Partnership equals 26 percent.
We disagree with petitioner's expert's conclusion that a
67.5-percent combined discount rate should apply. The record
does not contain sufficient facts with regard to the July 1989
sale to Mr. Silver of a fractional interest in one ownership unit
in the FC Partnership to justify petitioner's expert's reliance
thereon.
After considering all of the facts and circumstances and
the evidence presented at trial, we conclude that the appropriate
combined discount rate to use in this case for minority interest
and lack of marketability equals 45 percent (19-percent discount
- 22 -
for minority interest and 26-percent discount for lack of
marketability).
Applying this 45-percent combined discount to the per-unit
partnership liquidation value that we have found provides a date-
of-death fair market value of $338,130 for decedent's ownership
unit in the FC Partnership.
The schedule below reflects our conclusions with regard to
each element of the relevant computation of fair market value:
Valuation of Partnership
Properties Before Discounts:
Estimated Gross Annual Lease Income $15,082,200
Contingency Loss Reserve 5%
Operating Expenses $6,650,193
Estimated Annual Lease Income $8,432,007
Capitalization Rate 8.5%
FMV of Partnership Properties $100,000,000
Less Partnership Liabilities $41,595,787
FC Partnership Net Liquidation Value $58,404,213
Per-Unit Liquidation Value $614,781
Discounts For:
Minority Interest 19%
Lack of Marketability 26%
Combined Discount 45%
FMV of Decedent's Ownership Unit: $338,130
To reflect the foregoing,
Decision will be entered
under Rule 155.