An appraisal is required for Distribution and Conversion/Recharacterization of an asset, but it is not necessary for yearly reporting. A licensed real estate professional that is strictly “arms length” from both the investment and you as the account owner can provide a real estate fair market value analysis. This is more commonly referred to as a comparative market analysis (CMA). A CMA is a detailed report examining the homes currently on the market, under contract, recently sold or expired, withdrawn, or canceled. This determines what a property is worth in the current market.
Please indicate the status and value on the Fair Market Valuation Form and sign it yourself. Provide the necessary documentation that will support the status and value. You will not need a qualified, independent third party to perform the valuation. However, in order to zero out assets from your account, the Internal Revenue Code requires specific types of documentation to do so. The following are some acceptable examples:
A value of each asset within the LLC or entity is required in order to determine the value of the LLC or entity. Real estate assets owned in an LLC or entity must be evaluated by a third party as noted above. Other assets such as bank or brokerage accounts should have year-end statements proving their value.
The value of the asset may be provided by a qualified third party, but they must provide sufficient supporting documents with the Fair Market Valuation Form.