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B. Fractional Interest Discount
1. Mr. Talmage’s Report
Mr. Talmage applied a 20-percent fractional interest
discount to the fractional interest properties.4 Mr. Talmage
examined eight comparable sales of fractional interests and the
fractional interest discounts applied in each sale. In three of
the comparable sales (comparables 2, 4, 6), no fractional
interest discount was applied because the buyer was acquiring a
controlling interest with the purchase of the fractional
interest.5 Comparables 1, 5, 7, and 8 consisted of fractional
interests ranging from approximately 1 to 20 percent with
discounts ranging from 6 to 50 percent. Mr. Talmage adjusted
comparables 1, 5, and 8 downward and comparable 7 upward to
arrive at a 20-percent fractional interest discount. In making
4 Mr. Talmage alternatively suggested that a 25-percent
fractional interest discount would be appropriate due to
potential conflicts among the beneficiaries of decedent’s trust
which might burden the income-producing capabilities of the
properties. The only potential conflict shown by the record was
Thomas Brocato’s (son of decedent) contemplation of forcing the
sale of the fractional interest properties. Because we
determined the fractional interest discount based on a
hypothetical sale of the decedent’s interest, Thomas Brocato’s
threat of a forced sale has no impact on the fractional interest
discount. We find no additional discount is warranted based on
potential family conflicts.
5 Comparable 3 also yielded no fractional interest
discount; however, the buyer in that comparable was not acquiring
control of the property. Mr. Talmage accounts for the lack of a
discount by pointing to an accommodating seller and exceptional
circumstances surrounding the sale.
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