Fractional interest cemetery etc

[KHS445]

Is it a family cemetery, so the maintenance falls on the surviving family members or were plots sold with the understanding they came with a perpetual care agreement? The selling party may actually be getting out from under some longterm expense obligations. How is it being taxed or is it tax exempt?

 

[Digger88]

The cemetery part scares me as a CR. If the assignment is not 1-4 family or land with a H&BU as 1-4 family, that would be an easy pass for me.

On to the next log cabin or manufactured home with an addition.

It'll be fine how are you going to improve if you don't take on the tough ones

 

[Elliott]

When they put light rail under the West Hills of Portland, they had to move some cemetery plots and remains, which requires signing off from heirs. The attorney that handled it was a speaker and they had to track dow heirs from all over the US, even Germany, took years.

I once valued about an acre that was adjacent to a cemetary. The buyer thought it should have been dirt cheap, like $10K, and I was, nah its more like $75K.

 

[sputnam]

How do you figure out fractional interest? Someone hired me to value a subdividable 15 acre lot for someone who passed to sell to the remaining owner. It's zoned 1 lot per 10 acres so not so fast. Also, there is a cemetery on it which he also did not tell me about so I need to go see where that is. I'm assuming 1/2 the value needs a further discount since it's not as marketable as 1/2 of the whole and I've never done this before. What say you?

Interesting assignment... but a tough one. In most places, the cemetary portion is untouchable without jumping through hugely expensive regulatory issues and expense costs to move the graves. That portion of the property has no market value. The value of the remaining property may, or may not, be influenced by the presence of the cemetary. That's a market question but, finding data to extract market reaction to it will be difficult. You will need to reach far beyond your usual practice in both time and proximity.

 

[Digger88]

Have way through this and I think I'm doing it wrong. Why would an informed buyer pay the same to be in this mess as the co-owner who stands the most to gain. Would 2 values in this scenario make sense and let them figure it out?

 

[DWiley]

How do you figure out fractional interest? Someone hired me to value a subdividable 15 acre lot for someone who passed to sell to the remaining owner. It's zoned 1 lot per 10 acres so not so fast. Also, there is a cemetery on it which he also did not tell me about so I need to go see where that is. I'm assuming 1/2 the value needs a further discount since it's not as marketable as 1/2 of the whole and I've never done this before. What say you?

In my area, fractional interest transfers were not included in the online data. So, a couple of times a year I would go down to the reg of deeds and track them all down. Then I would compare those with other sales and extract a discount rate. It was a bit of effort, but I did a lot of partial interest appraisals for estate planners, so it was well worth the effort because the fees on those were typically 3X or 4X "normal" fees.

 

[Digger88]

I've changed my mind zero FI deduction is not its FMV as no one would pay half so I'm going back to my original thought. If it were on MLS how much would someone pay. The realtor agrees so I need to figure out that %.

 

[Digger88]

I guess I never noticed this and maybe no one cares about cemeteries like we think. This is in between two suburban homes adjacent to a top lot. Weird. And if you aren't out inspecting today get off your lazy azz lol

.

 

[Terrel L. Shields]

Weird. And if you aren't out inspecting today get off your lazy azz lol

There are tons of small cemeteries, many with no separate deed for the land but are protected by state law in most states. Moving a grave can cost thousands of dollars today. When a local corp or engineers lake was built I ran across an old fellow who worked for a guy moving the graves and he said they got $8 per grave. Mostly dug by hand and pick and shovel. The only backhoe was busy at the new cemetery preparing the place they would be buried. They'd dig one at a time, and if the stone was small, load it as well. He said the old graves were fairly easy as they were usually just a dark streak of dirt and many a few buttons or a belt buckle. The newest were the only ones with coffins and woe to you if you punctured the coffin. I just did 2 funeral homes so don't whine at me. And, I will be mowing the back lot of our cemetery this week.

So, my lazy arse and a helper are trying to fix a barn damaged in a storm, take out fence, pull corner posts, roll up wire and haul off, so driving comps would be a lazy day. We are using the hay bales for a short "scaffold"... Poor people have poor ways.

 

[Elliott]

Oh, forgot to say, "There's a IRS table for that."

AI:
"Fractional interest discounts account for lack of control and marketability when valuing partial ownership in real estate or entities for IRS gift/estate tax purposes. A qualified appraisal by a certified appraiser is required to substantiate the discount, typically ranging 15-40% based on factors like ownership size, property type, and partition feasibility.
Core Calculation Steps
1. Determine whole property value: Obtain a full appraisal of the asset’s fair market value (FMV), e.g., $1M for a property.
2. Calculate pro-rata share: Multiply by the fractional interest, e.g., 50% interest = $500K undivided value.
3. Apply discounts:
• Lack of Control (DLOC): 10-30%, reflecting inability to force sales or decisions.
• Lack of Marketability (DLOM): 10-30%, for limited buyer pool and illiquidity.
• Total discount combines both, often via cost-to-partition method: Hypothetical buyer’s cost/risk of partitioning (e.g., legal fees 5-15%) plus weighted market risks (e.g., 17% in Tax Court case Ludwick using 10% partition probability and discount rate).
4. Final value: Pro-rata minus total discount, e.g., 30% discount on $500K = $350K.
Example from Case Law
In Ludwick (T.C. Memo. 2010-104), a 50% interest in a $7.25M home used cost-to-partition: 26.5% if partitioned (fees + time), 16.2% if sold whole, weighted to 17.2% discount. Courts emphasize data-driven support over guidelines.

RS Requirements
Appraisal must meet Uniform Standards (USPAP) and include comparables, partition analysis, and sensitivity testing. IRS often challenges >15% discounts without robust evidence; consult IRM 4.48.6 for guidelines."