Estate of Eileen K. Brocato - Page 20




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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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