Page 154 - Virtual Currencies

19:25 - 9-Mar-2023
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The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing.
average selling price of $15. The FMV on the Unavailable prices. If selling prices or bid 1. Comparable Sales
valuation date was $12, figured as follows. and asked prices are not available, determine
the FMV by considering the following factors. The comparable sales method compares the
[(3 x $10) + (2 x $15)] ÷ 5 = $12 • For bonds, the soundness of the security, donated property with several similar properties
that have been sold. The selling prices, after
the interest yield, the date of maturity, and
Listings on more than one stock ex­ other relevant factors. adjustments for differences in date of sale, size,
change. Stocks or bonds listed on more than • For shares of stock, the company's net condition, and location, would then indicate the
one stock exchange are valued based on the worth, prospective earning power and divi- estimated FMV of the donated property.
prices of the exchange on which they are princi- dend-paying capacity, and other relevant
pally dealt. This applies if these prices are pub- factors. If the comparable sales method is used to
lished in a generally available listing or publica- determine the value of unimproved real prop-
tion of general circulation. If this is not Other factors. Other relevant factors in- erty (land without significant buildings, struc-
applicable, and the stocks or bonds are repor- clude: tures, or any other improvements that add to its
ted on a composite listing of combined ex- • The nature and history of the business, es- value), the appraiser should consider the follow-
changes in a publication of general circulation, pecially its recent history; ing factors when comparing the potential com-
use the composite list. See also Unavailable pri- • The goodwill of the business; parable property and the donated property.
ces, later. • The economic outlook in the particular in- • Location, size, and zoning or use restric-
dustry; tions.
Bid and asked prices on valuation date. If • The company's position in the industry, its • Accessibility and road frontage, and avail-
there were no sales within a reasonable period competitors, and its management; and able utilities and water rights.
before and after the valuation date, the FMV is • The value of securities of corporations en- • Riparian rights (right of access to and use
the average price between the bona fide bid gaged in the same or similar business. of the water by owners of land on the bank
and asked prices on the valuation date. For preferred stock, the most important factors of a river) and existing easements,
are its yield, dividend coverage, and protection rights-of-way, leases, etc..
Example. Although there were no sales of of its liquidation preference. • Soil characteristics, vegetative cover, and
Blue Corporation stock on the valuation date, You should keep complete financial and status of mineral rights.
bona fide bid and asked prices were available other information on which the valuation is • Other factors affecting value.
on that date of $14 and $16, respectively. The based. This includes copies of reports of exami-
FMV is $15, the average price between the bid nations of the company made by accountants, For each comparable sale, the appraisal
and asked prices. engineers, or any technical experts on or close must include the names of the buyer and seller,
No prices on valuation date. If there to the valuation date. the deed book and page number, the date of
were no prices available on the valuation date, sale and selling price, a property description,
you determine FMV by taking the average pri- Restricted securities. Some classes of stock the amount and terms of mortgages, property
ces between the bona fide bid and asked prices cannot be traded publicly because of restric- surveys, the assessed value, the tax rate, and
on the closest trading date before and after the tions imposed by the Securities and Exchange the assessor's appraised FMV.
valuation date. Both dates must be within a rea- Commission, or by the corporate charter or a The comparable selling prices must be ad-
sonable period. Then you weight these aver- trust agreement. These restricted securities
ages in inverse order by the respective number usually trade at a discount in relation to freely justed to account for differences between the
sale property and the donated property. Be-
of trading days between the bid and asked traded securities.
dates and the valuation date. To arrive at the FMV of restricted securities, cause differences of opinion may arise between
factors that you must consider include the re- appraisers as to the degree of comparability
Example. On the day you gave stock to a sale provisions found in the restriction agree- and the amount of the adjustment considered
qualified organization, no prices were available. ments, the relative negotiating strengths of the necessary for comparison purposes, an ap-
Bona fide bid and asked prices 3 days before buyer and seller, and the market experience of praiser should document each item of adjust-
the valuation date were $10 and 2 days after freely traded securities of the same class as the ment.
the valuation date were $15. The FMV on the restricted securities.
Only comparable sales having the least ad-
valuation date is $13, figured as follows. justments in terms of items and/or total dollar
Real Estate adjustments should be considered as compara-
[(2 x $10) + (3 x $15)] ÷ 5 = $13 ble to the donated property.
Prices only before or after valuation date, Because each piece of real estate is unique and
its valuation is complicated, a detailed appraisal
but not both. If no selling prices or bona fide by a professional appraiser is necessary. 2. Capitalization of Income
bid and asked prices are available on a date
within a reasonable period before the valuation The appraiser must be thoroughly trained in This method capitalizes the net income from the
date, but are available on a date within a rea- the application of appraisal principles and property at a rate that represents a fair return on
sonable period after the valuation date, or vice theory. In some instances, the opinions of the particular investment at the particular time,
versa, then the average price between the high- equally qualified appraisers may carry unequal considering the risks involved. The key ele-
est and lowest of such available prices may be weight, such as when one appraiser has a bet- ments are the determination of the income to be
treated as the value. ter knowledge of local conditions. capitalized and the rate of capitalization.
Large blocks of stock. When a large block of The appraisal report must contain a com- 3. Replacement Cost New or
stock is put on the market, it may lower the sell- plete description of the property, such as street Reproduction Cost Minus
ing price of the stock if the supply is greater address, legal description, and lot and block Observed Depreciation
than the demand. On the other hand, market number, as well as physical features, condition,
forces may exist that will afford higher prices for and dimensions. The use to which the property This method, used alone, usually does not re-
large blocks of stock. Because of the many fac- is put, zoning and permitted uses, and its po- sult in a determination of FMV. Instead, it gener-
tors to be considered, determining the value of tential use for other higher and better uses are ally tends to set the upper limit of value, particu-
large blocks of stock usually requires the help of also relevant. larly in periods of rising costs, because it is
experts specializing in underwriting large quan- reasonable to assume that an informed buyer
tities of securities or in trading in the securities In general, there are three main approaches will not pay more for the real estate than it
of the industry of which the particular company to the valuation of real estate. An appraisal may would cost to reproduce a similar property. Of
is a part. require the combined use of two or three meth- course, this reasoning does not apply if a simi-
ods rather than one method only. lar property cannot be created because of loca-
tion, unusual construction, or some other
Page 6 Publication 561 (January 2023)