Short answer: When a California family LLC or family partnership owns several properties, most of the big events in its life, such as a member’s death, a gift of interests, a buyout, a distribution or a refinance, need a supported market value for each property as of one date. The real estate values come first; a business appraiser or CPA then values the membership interests from them. After a member dies, a Section 754 election can make each property’s date of death value matter for the entity’s tax basis too. PM Appraisal appraises every commercial property type in every California county, so one appraiser can value the whole portfolio on one date. Call or text (805) 990-9700.
Families hold California real estate in LLCs and limited partnerships for good reasons: liability, management, financing and estate planning. Over a few decades, one entity can end up owning an apartment building in Long Beach, a strip center in Riverside County, a warehouse in Stockton, an almond orchard in Fresno County and a mixed-use building in San Diego. When something happens to the entity or one of its members, someone has to put a value on each of those properties, and they have to fit together.
This guide is for the CPAs, estate attorneys and family members who end up ordering those appraisals. It sits alongside our guides to partner and LLC buyouts, fractional interests and trust administration, and focuses on what is different when one entity owns many properties in many counties.
General information, not legal or tax advice. Talk to your attorney or CPA about your situation.
When does a family LLC need its real estate appraised?
The usual triggers:
- A member dies. The estate or trust needs the value of the member’s interest as of the date of death, and the entity may need property values for a Section 754 election (see below). See date of death appraisals.
- Gifts or sales of interests. Parents moving interests to children over time, or one sibling selling to another. Each transfer has its own date.
- A buyout, redemption or withdrawal. The operating agreement usually sets how the price is figured. See partner and LLC buyouts.
- A distribution. When the LLC deeds a property out to one member, often in a family split, that property needs a value, and so do the ones left behind if the split is meant to be equal.
- A refinance or new loan. The lender orders its own appraisal for the loan. See private and hard money lending appraisals and blanket loan appraisals.
- A member’s divorce or a dispute among members. See divorce appraisals of commercial property and litigation appraisals.
Why do the property values come before the value of the LLC interest?
Because a membership interest is a share of what the entity owns, less what it owes. For a real estate holding LLC, the properties are usually most of the balance sheet. A business appraiser or CPA typically starts with the market value of each property, adds the other assets, subtracts the debt and then decides what discounts, if any, apply to a minority or non-marketable interest.
We do the first part: an independent, supported market value for each property, and fractional or partial interest values in the real estate when the assignment calls for them. We do not value the business or apply entity-level discounts. Keeping those roles separate keeps each report on solid ground. See fractional interest appraisals for how the two fit together.
What does a Section 754 election ask of the appraisal after a member dies?
For an LLC taxed as a partnership, Internal Revenue Code Section 743 says the basis of the entity’s property is generally not adjusted when an interest transfers on the death of a partner, unless an election under Section 754 is in effect or the partnership has a substantial built-in loss right after the transfer. With the election, the entity’s basis in its property is increased or decreased to reflect the heir’s basis in the interest. Section 755 then allocates that adjustment in a way that reduces the difference between fair market value and adjusted basis of the partnership’s properties.
In plain terms, the CPA needs to know what each property was worth on the date of death, and often how that value splits between land and improvements, to spread the adjustment and figure depreciation going forward. A portfolio where one property is appraised carefully and the others are guessed at makes that allocation hard to defend. Whether to make the election, and how to report it, is your CPA’s call.
The heir’s basis in the interest itself generally follows Section 1014, which looks to fair market value at the date of death. Talk to your CPA about how these rules apply to your entity.
How do you appraise a family LLC portfolio spread across several counties?
The same way every time: one valuation date, one set of assumptions, one level of support, and a separate, property-specific analysis for each building or parcel. Each property gets its own report or its own section, so a single property can be pulled out later for a distribution or a loan without redoing the rest. See multi-property portfolio appraisals.
What changes from county to county is the local story each value has to account for. A few examples from properties families commonly hold:
- Older apartments in Los Angeles. The city’s Rent Stabilization Ordinance and seismic retrofit program shape the rent roll and the buyer pool. See commercial appraisal in Los Angeles.
- Farmland and orchards in the Central Valley. Williamson Act contracts and groundwater rules matter. See Fresno, Bakersfield and Stockton and Modesto, and our farm and ranch appraisal guide.
- Coastal property. The coastal zone and each city’s local coastal program limit what can be built. See Orange County, Santa Barbara and Ventura and San Diego.
- Industrial and distribution. Port, freight and warehouse rules drive demand in the Inland Empire and around the ports.
Our team appraises every commercial property type in every California county, so the family does not have to hire four firms and reconcile four styles of report.
Can moving LLC interests trigger a property tax reassessment?
Usually not, but the exceptions are big. Revenue and Taxation Code Section 64(a) says the transfer of interests in a legal entity generally is not a transfer of the entity’s real property. Two exceptions matter most for family entities:
- Change in control, Section 64(c). When a person or entity obtains control of more than 50 percent of the interests, every property the entity owns is treated as having changed ownership.
- Original co-owners, Section 64(d). When property went into the entity in a transfer excluded from reassessment under the proportional-interest rule of Section 62(a)(2), the members right after that transfer are “original coowners.” When cumulatively more than 50 percent of the interests move from them, the property is reappraised.
Section 480.2 requires these changes to be reported to the State Board of Equalization within 90 days. The BOE’s change in ownership FAQ also notes that for legal entities there is no limit on the number of years a county assessor may go back with an escape assessment. When a reassessment does happen, each county assessor sets its own new values, which is one more reason to have supported values for each property. Talk to your attorney or CPA before interests change hands.
What should you send the appraiser?
- A list of every property: address or parcel number, county, property type and who manages it.
- The valuation date or dates, and the purpose (estate, gift, buyout, distribution, divorce, loan).
- Rent rolls, current leases and the last two or three years of operating statements for income property.
- Recent capital work, permits, retrofit or code notices, and any known condition issues.
- For farmland: crop history, water sources and district, and any Williamson Act contract.
- Who to contact for access to each property.
Why do CPAs and estate attorneys call PM Appraisal for family entities?
- You talk to your appraiser. No coordinator, no AMC portal. We pick up the phone and walk you through each value.
- Every property type, every county. Apartments, office, retail, industrial, hotels, gas stations, land, vineyards, farms, mixed-use and new construction, anywhere in California. See our commercial property appraisal services.
- Every kind of commercial appraisal. Family entity work is one example. We also prepare lending, estate, trust, divorce, retrospective, partition, litigation, eminent domain, tax appeal and consulting assignments.
- Rush commercial appraisals in 5 to 7 business days, when a filing deadline or a closing is close. See rush commercial appraisals.
- Detailed narrative reports that show the comparables and the reasoning, so a CPA, an auditor or another family member can follow how each value was reached.
Standard timing depends on the property and scope. Call (805) 990-9700 for a timeline on your assignment. CPAs and attorneys: call (805) 990-9700 to scope a family LLC, estate or retrospective appraisal.
Frequently Asked Questions
When does a family LLC need its real estate appraised?
The common triggers are the death of a member, a gift or sale of membership interests, a buyout or redemption, a distribution of a property out of the LLC to one member, a refinance, a divorce of a member, and a dispute among members. Each one needs a supported market value for each property the entity owns, as of the right date. PM Appraisal appraises every commercial property type in every California county.
Do you value the LLC interest or the real estate?
The real estate. We appraise each property the LLC owns, and we can value fractional and partial interests in real property. The value of a membership interest in the entity, including any discount for lack of control or marketability, is a business valuation question for a business appraiser or CPA, who usually starts from our real estate values.
What is a Section 754 election, and why does it need an appraisal?
For an LLC taxed as a partnership, Internal Revenue Code Section 743 generally does not adjust the basis of the entity's property when an interest transfers at a member's death, unless a Section 754 election is in effect or the partnership has a substantial built-in loss. With the election, the inside basis is adjusted, and Section 755 allocates the adjustment in a way that reduces the difference between fair market value and adjusted basis of the partnership's properties. That makes a supported date of death value for each property important. Your CPA decides whether the election makes sense.
Can one appraiser value LLC properties in different counties?
Yes. A family LLC often owns an apartment building in Los Angeles, an industrial building in the Inland Empire and farmland in the Central Valley. We appraise every property type in every California county, on the same valuation date, with the same assumptions and the same level of support, so the CPA and the members are working from one consistent set of numbers.
Does transferring LLC interests trigger a property tax reassessment?
Usually not, but sometimes yes. Revenue and Taxation Code Section 64(a) says transfers of interests in a legal entity generally are not a transfer of the entity's real property. Section 64(c) treats a change in control, more than 50 percent, as a change in ownership of every property the entity owns, and Section 64(d) covers transfers by original co-owners. Those changes are reported to the State Board of Equalization within 90 days. Talk to your attorney or CPA before interests move.
Can you appraise the properties as of a past date?
Yes. Date of death, the date of a gift, the date a member withdrew or the date of separation in a member's divorce are all past dates. A retrospective appraisal values each property as of that date with the sales, leases and market conditions from that time.
Do you only do family LLC and estate appraisals?
No. This is one example. We appraise every commercial property type, including apartments, office, retail, industrial, hotels, gas stations, land, vineyards, mixed-use and new construction, and every kind of commercial appraisal: lending, estate and date of death, trust, divorce, retrospective, partition, buyouts, litigation, eminent domain, tax appeals and consulting. Call or text (805) 990-9700.
A family LLC with properties in several counties?
CPAs, attorneys and members: call or text (805) 990-9700 with the property list, the counties and the date you need. You talk to the appraiser who will inspect the properties and write the reports. Rush commercial appraisals in 5 to 7 business days.
Keep reading
- Multi-property portfolio appraisals
- Fractional interest appraisals in California
- Partner and LLC buyout appraisals
- Date of death appraisals in California
- Estate and trust appraisals
- Commercial property appraisal in California
This article is general information, not legal or tax advice. Talk to your attorney or CPA about your situation.