Among the many types of investment assets that may be owned in a marital estate or a decedent’s estate are ownership interests in privately held businesses. Such interests may be in an operating company such as a wholesaler, retailer, manufacturer or a service company. The interest may also be in a real estate entity that could own commercial, industrial or residential properties (either multi-family apartment buildings or single-family houses) or agricultural or vacant land.
Since the asset is privately held and not actively or even thinly traded on any recognized exchange, this presents a number of hurdles to determining the value of the asset for inclusion in an individual’s net worth statement, gross estate or the amount of a gift. Accounting standards differentiate between assets that are easily valued by reference to quoted market prices or other data that is observable in the investment marketplace and those assets that must be based on “unobservable” inputs.1
