IRA/Roth conversation, self directed, real estate valuation
My self directed IRA is being converted to a Roth. The IRA is held in an LLC who’s has a 90% ownership in a piece of real estate in Mexico. Properties can take many years to sell in Mexico. How does the appraiser use the lack of marketability of the property to discount the valuation of the property? Is it the appraiser’s responsibility to consider lack of marketability, do to length of time to sell a property, in determining fair market value? What guidelines are used to determine lack of marketability? How long is a reasonable amount of time to market/sell a piece of real estate?
Thank you!
Permalink Submitted by Alan - IRA critic on Wed, 2016-11-02 23:44
Appraisal is not an exact science, but liquidity of the property is generally considered relative to a discount or premium. You need to find out how the appraisal was determined for this specific property. If you have reasons to convert before knowing the valuation, you can always recharacterize the conversion if the appraisal and therefore the 1099R reports a value that you think is too high or even if you just do not want to pay the taxes on the conversion.