been sitting on this for too long…and yes…I finally realized…it would be good to understand what the heck this is…might earn me like 2 points on D-day… I’ve read both schweser and the text a bunch of times…but just can’t get a handle on it? who’s gonna do the honours? help a mumu someone…please treat me like a 10 year old…
Since the privately held securities/assets in a LLP or LLC is not liquid and may not be easily valued they are subject to valuation discounts minority interest holdings - receive control discount, etc
heer has got it pretty good. that is why you can’t apply valuation discounts on publicly traded securities, since you know their value and there is no room for subjectivity
You may want to claim these discount for all other accounts but CRT and CLT as you want to get maximum tax deduction on transfer of assets to Charity
say you make a donation to a trust, of your stake in a private co. On the books, its worht 10mill, but because its private and highly illiquid, you cant ‘really’ get 10mill for it, more like 7. So upon the donation, the tax man wants to tax you on a sale of 10mil, but you complain, and say you need a valuation discout to the tune of 3 mill (10-7) due to the illiuid nature of the donation. So, hell tax you on a basis of a 7mill sale. therefore the valuation discount here is 3 mil.
great explanation sbmfj
sbmfj Wrote: ------------------------------------------------------- > say you make a donation to a trust, of your stake > in a private co. On the books, its worht 10mill, > but because its private and highly illiquid, you > cant ‘really’ get 10mill for it, more like 7. So > upon the donation, the tax man wants to tax you on > a sale of 10mil, but you complain, and say you > need a valuation discout to the tune of 3 mill > (10-7) due to the illiuid nature of the donation. > So, hell tax you on a basis of a 7mill sale. > therefore the valuation discount here is 3 mil. sbmfj…wow…that was tough to type… anyway…that’s a good way to put it…thanks a ton… that’s one more brain cell that been stuffed with some useful information… thanks heer and florin too…