System and methods for computing to support decomposing property into separately valued components

Abstract

A computer system, and methods for making and using it, for manipulating digital electrical signals to produce an illustration of a decomposition of property into separately valued components. The computer system includes a digital electrical computer controlled by a processor. The processor is programmed for manipulating digital electrical signals representing input data to the computer, the input data characterizing at least two components decomposed from the property, the manipulating including transforming the digital electrical signals into modified digital electrical signals representing respective values for each of the components, the values being computed to reflect taxation for the components. An input device is coupled to the computer and operable for converting the input data into the digital electrical signals and communicating the digital electrical signals to the computer. An output device is coupled to receive the modified digital electrical signals from the computer and to converting the modified digital electrical signals representing the respective values into an illustration of the computed respective prices. The property can be real estate or tax-exempt securities.

Claims

What is claimed is:

1. A computer apparatus for changing digital electrical signals to separately value components temporally decomposed from property, the computer apparatus including:

an input device operable for converting input data representing property into input digital electrical signals representing the input data;

a digital electrical computer having a processor, the processor electrically connected to the input device to receive the input digital electrical signals, the processor programmed to change the input digital electrical signals to produce modified digital electrical signals representing a separate market-based valuation, including taxation, of each of a plurality of components temporally decomposed from the property, the components including a term interest and a remainder interest;

a memory electrically connected to the processor; and wherein:

the processor manipulates further digital electrical signals to generate at least one document for one of the components by inserting at least one of the valuations in preexisting text data obtained from the memory; and

an output device electrically connected to the processor to print the document.

2. The computer apparatus of claim 1, wherein the modified digital electrical signals include modified digital electrical signals representing the respective valuation, including taxation, for each of the plurality of components temporally decomposed from tangible personal property as the property.

3. The computer apparatus of claim 2, wherein:

the document includes a trust document for the term interest.

4. The computer apparatus of claim 2 wherein:

the document includes a trust document for the remainder interest.

5. The computer apparatus of claim 2, wherein:

the document includes a trust document for the term interest; and wherein:

the processor manipulates additional electrical signals to generate a second document for a second of the components, the second document being generated by the processor inserting a second one of the valuations in second preexisting text data obtained from the memory; and wherein:

the second document includes a trust document for the remainder interest.

6. The computer apparatus of claim 2, wherein:

the document includes a limited partnership document for the term interest.

7. The computer apparatus of claim 2, wherein:

the document includes a limited partnership document for the remainder interest.

8. The computer apparatus of claim 2, wherein:

the document includes a limited partnership document for the term interest; and wherein:

the processor manipulates additional digital electrical signals to generate a second document for a second of the components, the second document being generated by the processor inserting a second one of the valuations in second preexisting text data obtained from the memory; and wherein:

the second document includes a limited partnership document for the remainder interest.

9. The computer apparatus of claim 2, wherein:

the document includes a prospectus for the term interest.

10. The computer apparatus of claim 2, wherein:

the document includes a prospectus for the remainder interest.

11. The computer apparatus of claim 2, wherein:

the document includes a prospectus for the term interest; and wherein:

the processor manipulates further digital electrical signals to generate a second document for a second of the components, the second document being generated by the processor inserting a second one of the valuations in second preexisting text data obtained from the memory; and wherein:

the second document includes a prospectus for the remainder interest.

12. The computer apparatus of claim 1, wherein the modified digital electrical signals include modified digital electrical signals representing the respective valuation, including taxation, for each of the plurality of components temporally decomposed from real estate as the property.

13. The computer apparatus of claim 12, wherein:

the document includes a trust document for the term interest.

14. The computer apparatus of claim 12 wherein:

the document includes a trust document for the remainder interest.

15. The computer apparatus of claim 12, wherein:

the document includes a trust document for the term interest; and wherein:

the processor manipulates additional electrical signals to generate a second document for a second of the components, the second document being generated by the processor inserting a second one of the valuations in second preexisting text data obtained from the memory; and wherein:

the second document includes a trust document for the remainder interest.

16. The computer apparatus of claim 12, wherein:

the document includes a limited partnership document for the term interest.

17. The computer apparatus of claim 12, wherein:

the document includes a limited partnership document for the remainder interest.

18. The computer apparatus of claim 12, wherein:

the document includes a limited partnership document for the term interest; and wherein:

the processor manipulates additional digital electrical signals to generate a second document for a second of the components, the second document being generated by the processor inserting a second one of the valuations in second preexisting text data obtained from the memory; and wherein:

the second document includes a limited partnership document for the remainder interest.

19. The computer apparatus of claim 12, wherein:

the document includes a prospectus for the term interest.

20. The computer apparatus of claim 12, wherein:

the document includes a prospectus for the remainder interest.

21. The computer apparatus of claim 12, wherein:

the document includes a prospectus for the term interest; and wherein:

the processor manipulates further digital electrical signals to generate a second document for a second of the components, the second document being generated by the processor inserting a second one of the valuations in second preexisting text data obtained from the memory; and wherein:

the second document includes a prospectus for the remainder interest.

22. The computer apparatus of claim 1, wherein the modified digital electrical signals include modified digital electrical signals representing the respective valuation, including taxation, for each of the plurality of components temporally decomposed from a tax-exempt security as the property.

23. The computer apparatus of claim 22, wherein:

the document includes a trust document for the term interest.

24. The computer apparatus of claim 22 wherein:

the document includes a trust document for the remainder interest.

25. The computer apparatus of claim 22, wherein:

the document includes a trust document for the term interest; and wherein:

the processor manipulates additional electrical signals to generate a second document for a second of the components, the second document being generated by the processor inserting a second one of the valuations in second preexisting text data obtained from the memory; and wherein:

the second document includes a trust document for the remainder interest.

26. The computer apparatus of claim 22, wherein:

the document includes a limited partnership document for the term interest.

27. The computer apparatus of claim 22, wherein:

the document includes a limited partnership document for the remainder interest.

28. The computer apparatus of claim 22, wherein:

the document includes a limited partnership document for the term interest; and wherein:

the processor manipulates additional digital electrical signals to generate a second document for a second of the components, the second document being generated by the processor inserting a second one of the valuations in second preexisting text data obtained from the memory; and wherein:

the second document includes a limited partnership document for the remainder interest.

29. The computer apparatus of claim 22, wherein:

the document includes a prospectus for the term interest.

30. The computer apparatus of claim 22, wherein:

the document includes a prospectus for the remainder interest.

31. The computer apparatus of claim 22, wherein:

the document includes a prospectus for the term interest; and wherein:

the processor manipulates further digital electrical signals to generate a second document for a second of the components, the second document being generated by the processor inserting a second one of the valuations in second preexisting text data obtained from the memory; and wherein:

the second document includes a prospectus for the remainder interest.

32. The computer apparatus of claim 1, wherein:

the document includes a trust document for the term interest.

33. The computer apparatus of claim 1, wherein:

the document includes a trust document for the remainder interest.

34. The computer apparatus of claim 1, wherein:

the document includes a trust document for the term interest; and wherein:

the processor manipulates additional digital electrical signals to generate a second document for a second of the components, the second document being generated by the processor inserting a second one of the valuations in second preexisting text data obtained from the memory; and wherein:

the second document includes a trust document for the remainder interest.

35. The computer apparatus of claim 1, wherein:

the document includes a limited partnership document for the term interest.

36. The computer apparatus of claim 1, wherein:

the document includes a limited partnership document for the remainder interest.

37. The computer of claim 1, wherein:

the document is a limited partnership document for the term interest; and wherein:

the processor manipulates additional digital electrical signals to generate a second document for a second of the components, the second document being generated by the processor inserting a second one of the valuations in second preexisting text data obtained from the memory; and wherein:

the second document includes a limited partnership document for the remainder interest.

38. The computer apparatus of claim 1, wherein:

the document includes a prospectus for the term interest.

39. The computer apparatus of claim 1, wherein:

the document includes a prospectus for the remainder interest.

40. The computer apparatus of claim 1, wherein:

the document includes a prospectus for the term interest; and wherein:

the processor manipulates additional digital electrical signals to generate a second document for a second of the components, the second document being generated by the processor inserting a second one of the valuations in second preexisting text data obtained from the memory; and wherein:

the second document includes a prospectus for the remainder interest.

41. A computer apparatus for handling output from a first apparatus for changing digital electrical signals to separately value components temporally decomposed from property, the first apparatus including

an input device operable for converting input data representing property into input digital electrical signals representing the input data,

a digital electrical computer having a processor, the processor electrically connected to the input device to receive the input digital electrical signals, the processor programmed to change the input digital electrical signals to produce modified digital electrical signals representing a separate market-based valuation, including taxation, of each of a plurality of components temporally decomposed from the property, the components including a term interest and a remainder interest,

a memory electrically connected to the processor, and wherein

the processor manipulates further digital electrical signals to generate at least one document for one of the components by inserting at least one of the valuations in preexisting text data obtained from the memory, and

an output device electrically connected to the processor to print output including the document, the computer apparatus comprising:

a second input device operable for converting second input data representing at least one of the components into second input digital electrical signals;

a second memory storing reference data representing cash flow and tax deduction schedules for a buyer of the at least one of the components;

a second digital electrical computer having a second processor electrically connected to the second input device to receive the second input digital electrical signals and to the second memory to receive the reference data, the second processor programmed to modify the second input digital electrical signals using the reference data to produce second modified digital electrical signals including signals corresponding to a tax for the at least one of the components; and

a second output device electrically connected to the second processor to print documentation including the tax for the at least one of the components.

42. The computer apparatus of claim 41, wherein the modified digital electrical signals include modified digital electrical signals representing the valuation, including taxation, for each of the plurality of components temporally decomposed from tangible personal property as the property.

43. The computer apparatus of claim 41, wherein the modified digital electrical signals include modified digital electrical signals representing the valuation, including taxation, for each of the plurality of components temporally decomposed from real estate as the property.

44. The computer apparatus of claim 41, wherein the modified digital electrical signals Include modified digital electrical signals representing the valuation, including taxation, for each of the plurality of components temporally decomposed from a tax-exempt security as the property.

45. A computer apparatus for handling output from a first apparatus for changing digital electrical signals to separately value components temporally decomposed from property, the first apparatus including

an input device operable for converting input data representing property into input digital electrical signals representing the input data,

a digital electrical computer having a processor, the processor electrically connected to the input device to receive the input digital electrical signals, the processor programmed to change the input digital electrical signals to produce modified digital electrical signals representing a separate market-based valuation, including taxation, for each of a plurality of components temporally decomposed from the property, the components including a term interest and a remainder interest,

a memory electrically connected to the processor, and wherein

the processor manipulates further digital electrical signals to generate at least one document for one of the components by inserting at least one of the valuations in preexisting text data obtained from the memory, and

an output device electrically connected to the processor to print output including the document, the computer apparatus comprising:

a second input device operable for converting second input data representing at least one of the components into second input digital electrical signals;

a second memory storing reference data representing cash flow and tax deduction schedules for a buyer of the at least one of the components;

a second digital electrical computer having a second processor electrically connected to the second input device to receive the second input digital electrical signals and to the second memory to receive the reference data, the second processor programmed to modify the second input digital electrical signals using the reference data to produce second modified digital electrical signals including signals corresponding to a tax schedule for the at least one of the components; and

a second output device electrically connected to the second processor to print documentation including the tax schedule for the at least one of the components.

46. The computer apparatus of claim 45, wherein the modified digital electrical signals include modified digital electrical signals representing the valuation, including taxation, for each of the plurality of components temporally decomposed from tangible personal property as the property.

47. The computer apparatus of claim 45, wherein the modified digital electrical signals include modified digital electrical signals representing the valuation, including taxation, for each of the plurality of components temporally decomposed from real estate as the property.

48. The computer apparatus of claim 45, wherein the modified digital electrical signals include modified digital electrical signals representing the valuation, including taxation, for each of the plurality of components temporally decomposed from a tax-exempt security as the property.

49. A computer apparatus for handling output from a first apparatus for changing digital electrical signals to separately value components temporally decomposed from property, the first apparatus including

an input device operable for converting input data representing property into input digital electrical signals representing the input data,

a digital electrical computer having a processor, the processor electrically connected to the input device to receive the input digital electrical signals, the processor programmed to change the input digital electrical signals to produce modified digital electrical signals representing a separate market-based valuation, including taxation, of each of a plurality of components temporally decomposed from the property, the components including a term interest and a remainder interest,

a memory electrically connected to the processor, and wherein

the processor manipulates further digital electrical signals to generate at least one document for one of the components by inserting at least one of the valuations in preexisting text data obtained from the memory, and

an output device electrically connected to the processor to print output including the document, the computer apparatus comprising:

a second input device operable for converting second input data representing at least one of the components into second input digital electrical signals;

a second digital electrical computer having a second processor electrically connected to the second input device to receive the second input digital electrical signals, the second processor programmed to change the second input digital electrical signals, to produce second modified digital electrical signals representing a second valuation, including taxation, for the at least one of the components; and

a second output device electrically connected to the second processor to print an illustration representing the second valuation.

50. The computer apparatus of claim 49, wherein the second modified digital electrical signals include second modified digital electrical signals representing a current market-based yield discount rate for the at least one component and a market-based price of the at least one component by computing a sum of present values of expected aftertax future cash flows and future purchaser tax savings from tax deductions associated with the at least one component.

51. The computer apparatus of claim 50, wherein the modified digital electrical signals include modified digital electrical signals representing the valuation, including taxation, for each of the plurality of components temporally decomposed from tangible personal property as the property.

52. The computer apparatus of claim 50, wherein the modified digital electrical signals include modified digital electrical signals representing the valuation, including taxation, for each of the plurality of components temporally decomposed from real estate as the property.

53. The computer apparatus of claim 50, wherein the modified digital electrical signals include modified digital electrical signals representing the valuation, including taxation, for each of the plurality of components temporally decomposed from a tax-exempt security as the property.

54. The computer apparatus of claim 49, wherein:

the second modified digital electrical signals representing the second valuation are modified by the second processor to generate an insurance premium for insuring against a risk of the second valuation; and wherein:

the illustration includes the insurance premium.

55. The computer apparatus of claim 54, wherein the modified digital electrical signals include modified digital electrical signals representing the valuation, including taxation, for each of the plurality of components temporally decomposed from tangible personal property as the property.

56. The computer apparatus of claim 54, wherein the modified digital electrical signals include modified digital electrical signals representing the valuation, including taxation, for each of the plurality of components temporally decomposed from real estate as the property.

57. The computer apparatus of claim 54, wherein the modified digital electrical signals include modified digital electrical signals representing the valuation, including taxation, for each of the plurality of components temporally decomposed from a tax-exempt security as the property.

58. The computer apparatus of claim 49, wherein the modified digital electrical signals include modified digital electrical signals representing the valuation, including taxation, for each of the plurality of components temporally decomposed from tangible personal property as the property.

59. The computer apparatus of claim 49, wherein the modified digital electrical signals include modified digital electrical signals representing the valuation, including taxation, for each of the plurality of components temporally decomposed from real estate as the property.

60. The computer apparatus of claim 49, wherein the modified digital electrical signals include modified digital electrical signals representing the valuation, including taxation, for each of the plurality of components temporally decomposed from a tax-exempt security as the property.

61. A method for making a computer apparatus for changing digital electrical signals to generate respective valuations of components temporally decomposed from property, the method including the steps of:

providing an input device operable for converting input data representing property into input digital electrical signals;

electrically connecting a processor of a digital electrical computer to the input device to receive the input digital electrical signals;

programming the processor to change the input digital electrical signals to produce digital electrical signals representing a separate market-based valuation, including taxation, of each of a plurality of components temporally decomposed from the property, the components including a term interest and a remainder interest;

providing a memory electrically connected to the processor; wherein:

the step of programming is carried out so that the processor manipulates further digital electrical signals to generate a document for one of the components by inserting at least one of the respective valuations in preexisting text data stored in the memory; and

electrically connecting an output device to the processor to print the document.

62. The method of claim 61, where in the step of programming is carried out so that the modified digital electrical signals include modified digital electrical signals representing the respective valuation, including taxation, for each of the plurality of components temporally decomposed from tangible personal property as the property.

63. The method of claim 62, wherein the step of programming is carried out so that the document includes a trust document for the term interest.

64. The method of claim 62, wherein the step of programming is carried out so that the document includes a trust document for the remainder interest.

65. The method of claim 62, wherein the step of programming is carried out so that the document includes a trust document for the term interest, the processor manipulates additional digital electrical signals to generate a second document for a second of the components, the second document being generated by the processor inserting a second of the valuations in second preexisting text data obtained from the memory, and the second document includes a trust document for the remainder interest.

66. The method of claim 62, wherein the step of programming is carried out so that the document includes a limited partnership document for the term interest.

67. The method of claim 62, wherein the step of programming is carried out so that the document includes a limited partnership document for the remainder interest.

68. The method of claim 62, wherein the step of programming is carried out so that the document includes a limited partnership document for the term interest, the processor manipulates additional digital electrical signals to generate a second document for a second of the components, the second document being generated by the processor inserting a second one of the valuations in second preexisting text data obtained from the memory, and the second document includes a limited partnership document for the remainder interest.

69. The method of claim 62, wherein the step of programming is carried out so that the document includes a prospectus for the term interest.

70. The method of claim 62, wherein the step of programming is carried out so that the document includes a prospectus for the remainder interest.

71. The method of claim 62, wherein the step of programming is carried out so that the document includes a prospectus for the term interest, the processor manipulates additional digital electrical signals to generate a second document for a second of the components, the second document being generated by the processor inserting a second one of the valuations in second preexisting text data obtained from the memory, and the second document includes a prospectus for the remainder interest.

72. The computer system of claim 61, wherein the step of programming is carried out so that the modified digital electrical signals include modified digital electrical signals representing the respective valuation, including taxation, for each of the plurality of components temporally decomposed from real estate as the property.

73. The method of claim 72, wherein the step of programming is carried out so that the document includes a trust document for the term interest.

74. The method of claim 72, wherein the step of programming is carried out so that the document includes a trust document for the remainder interest.

75. The method of claim 72, wherein the step of programming is carried out so that the document includes a trust document for the term interest, the processor manipulates additional digital electrical signals to generate a second document for a second of the components, the second document being generated by the processor inserting a second of the valuations in second preexisting text data obtained from the memory, and the second document includes a trust document for the remainder interest.

76. The method of claim 72, wherein the step of programming is carried out so that the document includes a limited partnership document for the term interest.

77. The method of claim 72, wherein the step of programming is carried out so that the document includes a limited partnership document for the remainder interest.

78. The method of claim 72, wherein the step of programming is carried out so that the document includes a limited partnership document for the term interest, the processor manipulates additional digital electrical signals to generate a second document for a second of the components, the second document being generated by the processor inserting a second one of the valuations in second preexisting text data obtained from the memory, and the second document includes a limited partnership document for the remainder interest.

79. The method of claim 72, wherein the step of programming is carried out so that the document includes a prospectus for the term interest.

80. The method of claim 82, wherein the step of programming is carried out so that the document includes a prospectus for the remainder interest.

81. The method of claim 72, wherein the step of programming is carried out so that the document includes a prospectus for the term interest, the processor manipulates additional digital electrical signals to generate a second document for a second of the components, the second document being generated by the processor inserting a second one of the valuations in second preexisting text data obtained from the memory, and the second document includes a prospectus for the remainder interest.

82. The computer system of claim 61, wherein the step of programming is carried out so that the modified digital electrical signals include modified digital electrical signals representing the respective valuation, including taxation, for each of the plurality of components temporally decomposed from a tax-exempt security as the property.

83. The method of claim 82, wherein the step of programming is carried out so that the document includes a trust document for the term interest.

84. The method of claim 82, wherein the step of programming is carried out so that the document includes a trust document for the remainder interest.

85. The method of claim 82, wherein the step of programming is carried out so that the document includes a trust document for the term interest, the processor manipulates additional digital electrical signals to generate a second document for a second of the components, the second document being generated by the processor inserting a second of the valuations in second preexisting text data obtained from the memory, and the second document includes a trust document for the remainder interest.

86. The method of claim 82, wherein the step of programming is carried out so that the document includes a limited partnership document for the term interest.

87. The method of claim 82, wherein the step of programming is carried out so that the document includes a limited partnership document for the remainder interest.

88. The method of claim 82, wherein the step of programming is carried out so that the document includes a limited partnership document for the term interest, the processor manipulates additional digital electrical signals to generate a second document for a second of the components, the second document being generated by the processor inserting a second one of the valuations in second preexisting text data obtained from the memory, and the second document includes a limited partnership document for the remainder interest.

89. The method of claim 82, wherein the step of programming is carried out so that the document includes a prospectus for the term interest.

90. The method of claim 82, wherein the step of programming is carried out so that the document includes a prospectus for the remainder interest.

91. The method of claim 82, wherein the step of programming is carried out so that the document includes a prospectus for the term interest, the processor manipulates additional digital electrical signals to generate a second document for a second of the components, the second document being generated by the processor inserting a second one of the valuations in second preexisting text data obtained from the memory, and the second document includes a prospectus for the remainder interest.

92. The method of claim 61, wherein the step of programming is carried out so that the document includes a trust document for the term interest.

93. The method of claim 61, wherein the step of programming is carried out so that the document includes a trust document for the remainder interest.

94. The method of claim 61, wherein the step of programming is carried out so that the document includes a trust document for the term interest, the processor manipulates additional digital electrical signals to generate a second document for a second of the components, the second document being generated by the processor inserting a second of the valuations in second preexisting text data obtained from the memory, and the second document includes a trust document for the remainder interest.

95. The method of claim 61, wherein the step of programming is carried out so that the document includes a limited partnership document for the term interest.

96. The method of claim 61, wherein the step of programming is carried out so that the document includes a limited partnership document for the remainder interest.

97. The method of claim 61, wherein the step of programming is carried out so that the document includes a limited partnership document for the term interest, the processor manipulates additional digital electrical signals to generate a second document for a second of the components, the second document being generated by the processor inserting a second one of the valuations in second preexisting text data obtained from the memory, and the second document includes a limited partnership document for the remainder interest.

98. The method of claim 61, wherein the step of programming is carried out so that the document includes a prospectus for the term interest.

99. The method of claim 61, wherein the step of programming is carried out so that the document includes a prospectus for the remainder interest.

100. The method of claim 61, wherein the step of programming is carried out so that the document includes a prospectus for the term interest, the processor manipulates additional digital electrical signals to generate a second document for a second of the components, the second document being generated by the processor inserting a second one of the valuations in second preexisting text data obtained from the memory, and the second document includes a prospectus for the remainder interest.

101. A method for making a computer apparatus for processing output from a first apparatus for changing digital electrical signals to separately value components temporally decomposed from property, the first apparatus including

an input device operable for converting input data representing property into input digital electrical signals representing the input data,

a digital electrical computer having a processor, the processor electrically connected to the input device to receive the input digital electrical signals, the processor programmed to change the input digital electrical signals to produce modified digital electrical signals representing a separate market-based valuation, including taxation, of each of a plurality of components temporally decomposed from the property, the components including a term interest and a remainder interest,

a memory electrically connected to the processor, and wherein

the processor manipulates further digital electrical signals to generate at least one document for one of the components by inserting at least one of the valuations in preexisting text data obtained from the memory, and

an output device electrically connected to the processor to print output including the document, the method comprising the steps of:

providing a second input device operable for converting second input data representing at least one of the components into second input digital electrical signals;

providing a second memory storing reference data;

providing a second digital electrical computer having a second processor electrically connected to the second input device and electrically connected to the second memory;

programming the second processor to change the second input digital electrical signals by using the reference data from the memory, representing cash flow and tax deduction schedules for a buyer of the at least one of the components, to produce second modified digital electrical signals including signals corresponding to a tax for the at least one of the components; and

providing a second output device electrically connected to the second processor to print documentation for the at least one of the components, the documentation including the tax.

102. The computer method of claim 101, wherein the step of programming is carried out so that the modified digital electrical signals include modified digital electrical signals representing the valuation, including taxation, for each of the plurality of components temporally decomposed from tangible personal property as the property.

103. The computer method of claim 101, wherein the step of programming is carried out so that the modified digital electrical signals include modified digital electrical signals representing the valuation, Including taxation, for each of the plurality of components temporally decomposed from real estate as the property.

104. The computer method of claim 101, wherein the step of programming is carried out so that the modified digital electrical signals include modified digital electrical signals representing the valuation, including taxation, for each of the plurality of components temporally decomposed from a tax-exempt security as the property.

105. A method for making a computer apparatus for processing output from a first apparatus for changing digital electrical signals to separately value components temporally decomposed from property, the first apparatus including

an input device operable for converting input data representing property into input digital electrical signals representing the input data,

a digital electrical computer having a processor, the processor electrically connected to the input device to receive the input digital electrical signals, the processor programmed to change the input digital electrical signals to produce modified digital electrical signals representing a separate market-based valuation, including taxation, of each of a plurality of components temporally decomposed from the property, the components including a term interest and a remainder interest,

a memory electrically connected to th e processor, and wherein

the processor manipulates further digital electrical signals to generate at least one document for one of the components by inserting at least one of the valuations in preexisting text data obtained from the memory, and

an output device electrically connected to the processor to print output including the document, the method comprising the steps of:

providing a second input device operable for converting second input data representing at least one of the components into second input digital electrical signals;

providing a second memory storing reference data;

providing a second digital electrical computer having a second processor electrically connected to the second input device and electrically connected to the second memory;

programming the second processor to change the second input digital electrical signals by using the reference data from the second memory, representing cash flow and tax deduction schedules for a buyer of the at least one of the components, to produce second modified digital electrical signals including signals corresponding to a tax filing schedule for the at least one of the components; and

providing a second output device electrically connected to the second processor to print documentation including the tax filing schedule.

106. The computer method of claim 105, wherein the step of programming is carried out so that the modified digital electrical signals include modified digital electrical signals representing the valuation, including taxation, for each of the plurality of components temporally decomposed from tangible personal property as the property.

107. The computer method of claim 105, wherein the step of programming is carried out so that the modified digital electrical signals include modified digital electrical signals representing the valuation, including taxation, for each of the plurality of components temporally decomposed from real estate as the property.

108. The computer method of claim 105, wherein the step of programming is carried out so that the modified digital electrical signals include modified digital electrical signals representing the valuation, including taxation, for each of the plurality of components temporally decomposed from a tax-exempt security as the property.

109. A method for making a computer apparatus for processing output from a first apparatus for changing digital electrical signals to separately value components temporally decomposed from property, the first apparatus including

an input device operable for converting input data representing property into input digital electrical signals representing the input data,

a digital electrical computer having a processor, the processor electrically connected to the input device to receive the input digital electrical signals, the processor programmed to change the input digital electrical signals to produce modified digital electrical signals representing a separate market-based valuation, including taxation, of each of a plurality of components temporally decomposed from the property, the components including a term interest and a remainder interest,

a memory electrically connected to the processor, and wherein

the processor manipulates further digital electrical signals to generate at least one document for one of the components by inserting at least one of the valuations in preexisting text data obtained from the memory, and

an output device electrically connected the processor to print output including the document, the method comprising the steps of:

providing a second input device operable for converting second input data representing at least one of the components into second input digital electrical signals;

electrically connecting a second processor of a second digital electrical computer to the second input device to receive the second input digital electrical signals;

programming the second processor to change the second input digital electrical signals to produce second modified digital electrical signals representing a second valuation, including taxation, for the at least one of the components; and

providing a second output device electrically connected to the second processor to print a second output representing the second valuation.

110. The method of claim 109, wherein the step of programming the second processor is carried out so that the second modified digital electrical signals include second modified digital electrical signals representing a current market-based discount rate for the at least one component and a market-based price of the at least one component by computing a sum of present values of expected aftertax future cash flows and future purchaser tax savings from tax deductions associated with the at least one component.

111. The computer method of claim 110, wherein the step of programming is carried out so that the modified digital electrical signals include modified digital electrical signals representing the valuation, including taxation, for each of the plurality of components temporally decomposed from tangible personal property as the property.

112. The computer method of claim 110, wherein the step of programming is Carried out so that the modified digital electrical signals include modified digital electrical signals representing the valuation, including taxation, for each of the plurality of components temporally decomposed from real estate as the property.

113. The computer method of claim 110, wherein the step of programming is carried out so that the modified digital electrical signals include modified digital electrical signals representing the valuation, including taxation, for each of the plurality of components temporally decomposed from a tax-exempt security as the property.

114. The method of claim 109, wherein the step of programming the second processor is carried out so that the second modified digital electrical signals representing the second valuation are modified by the second processor to generate an insurance premium for insuring against a risk of the second valuation so that the second output includes the insurance premium.

115. The computer method of claim 114, wherein the step of programming is carried out so that the modified digital electrical signals include modified digital electrical signals representing the valuation, including taxation, for each of the plurality of components temporally decomposed from tangible personal property as the property.

116. The computer method of claim 114, wherein the step of programming Is carried out so that the modified digital electrical signals include modified digital electrical signals representing the valuation, including taxation, for each of the plurality of components temporally decomposed from real estate as the property.

117. The computer method of claim 114, wherein the step of programming is carried out so that the modified digital electrical signals include modified digital electrical signals representing the valuation, including taxation, for each of the plurality of components temporally decomposed from a tax-exempt security as the property.

118. The computer method of claim 109, wherein the step of programming is carried out so that the modified digital electrical signals include modified digital electrical signals representing the valuation, including taxation, for each of the plurality of components temporally decomposed from tangible personal property as the property.

119. The computer method of claim 109, wherein the step of programming is carried out so that the modified digital electrical signals include modified digital electrical signals representing the valuation, including taxation, for each of the plurality of components temporally decomposed from real estate as the property.

120. The computer method of claim 109, wherein the step of programming is carried out so that the modified digital electrical signals include modified digital electrical signals representing the valuation, including taxation, for each of the plurality of components temporally decomposed from a tax-exempt security as the property.

121. A method for using a computer apparatus for manipulating digital electrical signals to generate separate valuations of components temporally decomposed from property, the method including the steps of:

converting, with an input device, input data representing property into input digital electrical signals representing the input data;

processing the input digital electrical signals with a programmed processor of a digital electrical computer electrically connected to the input device, the processing to change the input digital electrical signals into modified digital electrical signals representing a separate valuation, including taxation, of each of a plurality of components temporally decomposed from the property, the components including a term interest and a remainder interest; wherein

the step of processing is carried out so that the processor manipulates additional digital electrical signals to generate at least one document for one of the components by inserting at least one of the valuations in preexisting text stored in a memory electrically connected to the processor; and

generating output including the document at an output device electrically connected to the processor.

122. The method of claim 121, wherein the step of processing is carried out so that modified digital electrical signals include modified digital electrical signals representing the respective valuation, including taxation, for each of the plurality of components temporally decomposed from tangible personal property as the property.

123. The method of claim 122, wherein the step of processing is carried out so that the document includes a trust document for the term interest.

124. The method of claim 122, wherein the step of processing is carried out so that the document includes a trust document for the remainder interest.

125. The method of claim 122, wherein the step of processing is carried out so the the document includes a trust document for the term interest, the processor manipulates additional digital electrical signals to generate a second document for a second of the components, the second document being generated by the processor inserting a second one of the respective valuations in second preexisting text data obtained from the memory, and the second document includes a trust document for the remainder interest.

126. The method of claim 122, wherein the step of processing is carried out so that the document includes a limited partnership document for the term interest.

127. The method of claim 122, wherein the step of processing is carried out so that the document includes a limited partnership document for the remainder interest.

128. The method of claim 122, wherein the step of processing is carried out so that the document includes a limited partnership document for the term interest, the processor manipulates additional digital electrical signals to generate a second document for a second of the components, the second document being generated by the processor inserting a second one of the valuations in second preexisting text data obtained from the memory, and the second document includes a limited partnership document for the remainder interest.

129. The method of claim 122, wherein the step of processing is carried out so that the document includes a prospectus for the term interest.

130. The method of claim 122, wherein the step of processing is carried out so that the document includes a prospectus for the remainder interest.

131. The method of claim 122, wherein the step of processing is carried out so that the document including a prospectus for the term interest, the processor manipulates additional digital electrical signals to generate a second document for a second of the components, the second document being generated by the processor inserting a second one of the valuations in second preexisting text data obtained from the memory, and the second document including a prospectus for the remainder interest.

132. The computer system of claim 121, wherein the step of processing is carried out so that the modified digital electrical signals include modified digital electrical signals representing the respective valuation, including taxation, for each of the plurality of components temporally decomposed from real estate as the property.

133. The method of claim 132, wherein the step of processing is carried out so that the document includes a trust document for the term interest.

134. The method of claim 132, wherein the step of processing is carried out so that the document includes a trust document for the remainder interest.

135. The method of claim 132, wherein the step of processing is carried out so that the document includes a trust document for the term interest, the processor manipulates additional digital electrical signals to generate a second document for a second of the components, the second document being generated by the processor inserting a second one of the valuations in second preexisting text data obtained from the memory, and the second document includes a trust document for the remainder interest.

136. The method of claim 132, wherein the step of processing is carried out so that the document includes a limited partnership document for the term interest.

137. The method of claim 132, wherein the step of processing is carried out so that the document includes a limited partnership document for the term interest.

138. The method of claim 132, wherein the step of processing is carried out so that the document includes a limited partnership document for the term interest, the processor manipulates additional digital electrical signals to generate a second document for a second of the components, the second document being generated by the processor inserting a second one of the valuations in second preexisting text data obtained from the memory, and the second document includes a limited partnership document for the remainder interest.

139. The method of claim 132, wherein the step of processing is carried out so that the document includes a prospectus for the term interest.

140. The method of claim 132, wherein the step of processing is carried out so that the document includes a prospectus for the remainder interest.

141. The method of claim 132, wherein the step of processing is carried out so that the document including a prospectus for the term interest, the processor manipulates additional digital electrical signals to generate a second document for a second of the components, the second document being generated by the processor inserting a second one of the valuations in second preexisting text data obtained from the memory, and the second document including a prospectus for the remainder interest.

142. The computer system of claim 121, wherein the step of processing is carried out so that the modified digital electrical signals include modified digital electrical signals representing the respective valuation, including taxation, for each of the plurality of components temporally decomposed from a tax-exempt security as the property.

143. The method of claim 142, wherein the step of processing is carried out so that the document includes a trust document for the term interest.

144. The method of claim 142, wherein the step of processing is carried out so that the document includes a trust document for the remainder interest.

145. The method of claim 142, wherein the step of processing is carried out so that the document includes a trust document for the term interest, the processor manipulates additional digital electrical signals to generate a second document for a second of the components, the second document being generated by the processor inserting a second one of the valuations in second preexisting text data obtained from the memory, and the second document includes a trust document for the remainder interest.

146. The method of claim 142, wherein the step of processing is carried out so that the document includes a limited partnership document for the term interest.

147. The method of claim 142, wherein the step of processing is carried out so that the document includes a limited partnership document for the remainder interest.

148. The method of claim 142, wherein the step of processing is carried out so that the document includes a limited partnership document for the term interest, the processor manipulates additional digital electrical signals to generate a second document for a second of the components, the second document being generated by the processor inserting a second one of the valuations in second preexisting text data obtained from the memory, and the second document includes a limited partnership document for the remainder interest.

149. The method of claim 142, wherein the step of processing is carried out so that the document includes a prospectus for the term interest.

150. The method of claim 142, wherein the step of processing is carried out so that the document includes a prospectus for the remainder interest.

151. The method of claim 142, wherein the step of processing is carried out so that the document including a prospectus for the term interest, the processor manipulates additional digital electrical signals to generate a second document for a second of the components, the second document being generated by the processor inserting a second one of the valuations in second preexisting text data obtained from the memory, and the second document including a prospectus for the remainder interest.

152. The method of any one of claims 121-142, further comprising the steps of:

the step of processing is carried out so that the processor manipulates the input digital electrical signals to generate at least one document for one of the components, the document being generated by the processor combining preexisting text stored in a memory with a portion of the modified digital electrical signals, the memory being electrically connected to the processor.

153. The method of claim 121, wherein the step of processing is carried out so that the document includes a trust document for the remainder interest.

154. The method of claim 121, wherein the step of processing is carried out so that the document includes a trust document for the term interest, the processor manipulates additional digital electrical signals to generate a second document for a second of the components, the second document being generated by the processor inserting a second one of the valuations in second preexisting text data obtained from the memory, and the second document includes a trust document for the remainder interest.

155. The method of claim 121, wherein the step of processing is carried out so that the document includes a limited partnership document for the term interest.

156. The method of claim 121, wherein the step of processing is carried out so that the document includes a limited partnership document for the remainder interest.

157. The method of claim 121, wherein the step of processing is carried out so that the document includes a limited partnership document for the term interest, the processor manipulates additional digital electrical signals to generate a second document for a second of the components, the second document being generated by the processor inserting a second one of the valuations in second preexisting text data obtained from the memory, and the second document includes a limited partnership document for the remainder interest.

158. The method of claim 121, wherein the step of processing is carried out so that the document includes a prospectus for the term interest.

159. The method of claim 121, wherein the step of processing is carried out so that the document includes a prospectus for the remainder interest.

160. The method of claim 121, wherein the step of processing is carried out so that the document includes a prospectus for the term interest, the processor manipulates additional digital electrical signals to generate a second document for a second of the components, the second document being generated by the processor inserting a second one of the valuations in second preexisting text data obtained from the memory, and the second document includes a prospectus for the remainder interest.

161. A method for using a computer apparatus for processing output from a first apparatus for changing digital electrical signals to separately value components temporally decomposed from property, the first apparatus including

an input device operable for converting input data representing property into input digital electrical signals representing the input data,

a digital electrical computer having a processor, the processor electrically connected to the input device to receive the input digital electrical signals, the processor programmed to change the input digital electrical signals to produce modified digital electrical signals representing a separate market-based valuation, including taxation, of each of a plurality of components temporally decomposed from the property, the components including a term interest and a remainder interest,

a memory electrically connected to the processor, and wherein

the processor manipulates digital electrical signals to generate at least one document for one of the components by inserting at least one of the valuations in preexisting text data obtained from the memory, and

an output device electrically connected to the processor to print output including the document, the method comprising the steps of:

converting, with a second input device, second input data representing at least one of the components into second input digital electrical signals;

processing the second input digital electrical signals, with a second digital electrical computer having a programmed second processor, the second processor electrically connected to the second input device to obtain reference data from a second memory electrically connected to the second processor, the reference data representing cash flow and tax deduction schedules for a buyer of the at least one of the components, and to manipulate the second input digital electrical signals and the reference data to produce second modified digital electrical signals corresponding to a tax for the at least one of the components; and

generating documentation for the at least one of the components, with a second output device electrically connected to the second processor to print the documentation including the tax for the at least one of the components.

162. The computer method of claim 161, wherein the step of processing the second input digital electrical signals is carried out so that the second modified digital electrical signals include second modified digital electrical signals representing the valuation, including taxation, for each of the plurality of components temporally decomposed from tangible personal property as the property.

163. The computer method of claim 161, wherein the step of processing the second input digital electrical signals is carried out so that the second modified digital electrical signals include second modified digital electrical signals representing the valuation, including taxation, for each of the plurality of components temporally decomposed from real estate as the property.

164. The computer method of claim 161, wherein the step of processing the second input digital electrical signals is carried out so that the second modified digital electrical signals include second modified digital electrical signals representing the valuation, including taxation, for each of the plurality of components temporally decomposed from a tax-exempt security as the property.

165. A method of using a computer apparatus for processing output from a first apparatus for changing digital electrical signals to separately value components temporally decomposed from property, the first apparatus including

an input device operable for converting input data representing property into input digital electrical signals representing the input data,

a digital electrical computer having a processor, the processor electrically connected to the input device to receive the input digital electrical signals, the processor programmed to change the input digital electrical signals to produce modified digital electrical signals representing a separate market-based valuation, including taxation, of each of a plurality of components temporally decomposed from the property, the components including a term interest and a remainder interest,

a memory electrically connected to the processor, and wherein

the processor manipulates digital electrical signals to generate at least one document for one of the components by inserting at least one of the valuations in preexisting text data obtained from the memory, and

an output device electrically connected to the processor to print output including the document, the method comprising the steps of:

converting, with a second input device, second input data representing at least one of the components into second input digital electrical signals;

processing the second input digital electrical signals, with a second digital electrical computer having a programmed second processor, the second processor electrically connected to the second input device to obtain reference data from a second memory electrically connected to the second processor, the reference data representing cash flow and tax deduction schedules for a buyer of the at least one of the components, and to manipulate the second input digital electrical signals and the reference data to produce second modified digital electrical signals corresponding to a tax filing schedule for the at least one of the components; and

generating documentation for the at least one of the components, with a second output device electrically connected to the second processor to print the documentation including the tax filing schedule for the at least one of the components.

166. The computer method of claim 165, wherein the step of processing the second input digital electrical signals is carried out so that the second modified digital electrical signals include second modified digital electrical signals representing the valuation, including taxation, for each of the plurality of components temporally decomposed from tangible personal property as the property.

167. The computer method of claim 165, wherein the step of processing the second input digital electrical signals is carried out so that the second modified digital electrical signals include second modified digital electrical signals representing the valuation, including taxation, for each of the plurality of components temporally decomposed from real estate as the property.

168. The computer method of claim 165, wherein the step of processing the second input digital electrical signals is carried out so that the second modified digital electrical signals include second modified digital electrical signals representing the valuation, including taxation, for each of the plurality of components temporally decomposed from a tax-exempt security as the property.

169. A method for using a computer apparatus for processing output from a first apparatus for changing digital electrical signals to separately value components temporally decomposed from property, the first apparatus including

an input device operable converting input data representing property into input digital electrical signals representing the input data,

a digital electrical computer having a processor, the processor electrically connected to the input device to receive the input digital electrical signals, the processor programmed to change the input digital electrical signals to produce modified digital electrical signals representing a separate market-based valuation, including taxation, of each of a plurality of components temporally decomposed from the property, the components including a term interest and a remainder interest,

a memory electrically connected to the processor, and wherein

the processor manipulates further digital electrical signals to generate at least one document for one of the components by inserting at least one of the valuations in preexisting text data obtained from the memory, and

an output device electrically connected to the processor to print output including the document, the method comprising the steps of:

converting, with a second input device, second input data representing at least one of the components into second input digital electrical signals;

processing the second input digital electrical signals with a second digital electrical computer having a second processor electrically connected to the second input device, the processing to change the second input digital electrical signals into second modified electrical signals representing a second valuation, including taxation, for the at least one of the components; and

generating a second output representing the second valuation, with a second output device electrically connected to the second processor to print the second output.

170. The method of claim 169, wherein the processing the second input digital electrical signals is carried out so that the second modified electrical signals include second modified electrical signals representing a current market-based discount rate for the at least one component and a market-based price of the at least one component by computing a sum of present values of expected aftertax future cash flows and future purchaser tax savings from tax deductions associated with the at least one component.

171. The computer method of claim 170, herein the step of processing the second input digital electrical signals is carried out so that the second modified digital electrical signals include second modified digital electrical signals representing the valuation, including taxation, for each of the plurality of components temporally decomposed from tangible personal property as the property.

172. The computer method of claim 170, wherein the step of processing the second input digital electrical signals is carried out so that the second modified digital electrical signals include second modified digital electrical signals representing the valuation, including taxation, for each of the plurality of components temporally decomposed from real estate as the property.

173. The computer method of claim 170, wherein the step of processing the second input digital electrical signals is carried out so that the second modified digital electrical signals include second modified digital electrical signals representing the valuation, inducing taxation, for each of the plurality of components temporally decomposed from a tax-exempt security as the property.

174. The method of claim 169, wherein the processing the second input digital electrical signals is carried out so that the second modified electrical signals representing the second valuation are modified by the second processor to generate an insurance premium for insuring against a risk of the second valuation and so that the second output includes the insurance premium.

175. The computer method of claim 174, wherein the step of processing the second input digital electrical signals is carried out so that the second modified digital electrical signals include second modified digital electrical signals representing the valuation, including taxation, for each of the plurality of components temporally decomposed from tangible personal property as the property.

176. The computer method of claim 174, wherein the step of processing the second input digital electrical signals is carried out so that the second modified digital electrical signals include second modified digital electrical signals representing the valuation, including taxation, for each of the plurality of components temporally decomposed from real estate as the property.

177. The computer method of claim 174, wherein the step of processing the second input digital electrical signals is carried out so that the second modified digital electrical signals include second modified digital electrical signals representing the valuation, including taxation, for each of the plurality of components temporally decomposed from a tax-exempt security as the property.

178. The computer method of claim 169, wherein the step of processing the second input digital electrical signals is carried out so that the second modified digital electrical signals include second modified digital electrical signals representing the valuation, including taxation, for each of the plurality of components temporally decomposed from tangible personal property as the property.

179. The computer method of claim 169, wherein the step of processing the second input digital electrical signals is carried out so that the second modified digital electrical signals include second modified digital electrical signals representing the valuation, including taxation, for each of the plurality of components temporally decomposed from real estate as the property.

180. The computer method of claim 169, wherein the step of processing the second input digital electrical signals is carried out so that the second modified digital electrical signals include second modified digital electrical signals representing the valuation, including taxation, for each of the plurality of components temporally decomposed from a tax-exempt security as the property.

Description

I. TECHNICAL FIELD

This invention concerns a digital, electrical computer and a data processing system, and methods involving the same, applied to the financial fields of securities, real estate, and taxation. More particularly, this invention relates to a computer system for supporting a financial innovation involving the securitization of property by its decomposition into at least two components. One component can be an estate for years component and a second component can be a remainder interest. The computer system computes the respective values and investment characteristics of the components, and produces documentation thereof, to facilitate financial transactions involving the separate components.

II. BACKGROUND OF THE INVENTION

A. Description of the Prior Art

During the last a recession, a far greater number of businesses failed than would normally have been expected. Bankruptcies, financial defaults, and foreclosures on property also increased, and bad real estate loans caused an atypically large number of lenders to collapse. If there were obvious ways to increase investment return under conditions of economic stress, most likely those ways would have been uncovered long ago.

Consider real estate, for example. Commercial real estate market activity has been at or near a standstill since the last recession began. Although excess development of commercial space has received great attention in the financial press, there has also been a drastic reduction in capital available for real estate equity investment and finance.

Real estate equity capital has declined as pension funds have reduced or ended commitments of new equity capital to real estate capital markets. Real estate finance capital has declined correspondingly as savings and loan institutions have withdrawn from commercial real estate lending. Of even greater significance, real estate lending practices of insurance companies and commercial banks have come under greater regulatory scrutiny in response to increased loan defaults in the early 1990s, which has led to a tightening of standards for real estate loans and a reduction in flexibility on loan terms.

Property values have fallen, and investors are uncertain of how far the values have fallen because so few sales of commercial property are occurring.

The problem is not a lack of potential investors. Although the pension funds have withdrawn from the markets, the core group of real estate developers and professionals involved in the markets before the pension funds entered is still committed to the real estate business and willing to commit capital to acquire and control real estate for business investment purposes.

Nor is the problem a lack of potential financing. Despite some withdrawal by savings and loan institutions, insurance companies are still available to provide financing for sound commercial real estate developments.

One key restraint is an even stricter regulatory environment which is constraining the maturities of most loans that insurance companies are willing to make to no more than ten (10) years, while tax considerations dictate that the term of the loans needed by taxable real estate investors should be at least fifteen (15) years, and preferably twenty (20) or more. In other words, financing necessary to sustain the level of liquidity historically experienced by the real estate markets is not available from financial institutions on acceptable terms and conditions.

The result has been market "gridlock" and a dearth of real estate transactions over the past few years.

There is an additional restriction of lending practices of insurance companies. Due to high nationwide vacancy rates in commercial properties, insurance companies are primarily making real estate loans on property that is almost fully leased to tenants that are unlikely to default on their leases. Thus, the credit ratings of the tenants are a prime consideration in deciding whether loans should be made.

In fact, insurance companies currently view real estate loans as financings of existing tenant leases. Thus, lenders usually insist that property owners assign the rent payments to the lenders to provide additional assurance that loan payments will be made, and the lenders also insist that the rent payments totally amortize the loans. (The primary reason that most offered mortgages are for no more than ten years is that, currently, most leases run for no more than ten years.) Furthermore, the lenders can view their legal claims on the tenants' rental payments as perhaps more important than their claims on the property, because in a market with excess space, a claim on vacant space is not particularly valuable.

The real estate market has been troubled for some time, and despite great economic pressure to improve the situation, a way to do so has not surfaced.

III. SUMMARY OF THE INVENTION

In response to the above, a new financial product has been developed based on the concept that property value consists of separately valuable property rights that can be worth more when sold separately. In a manner of speaking, the whole can be less than the sum of its parts.

With the development of a new financial product, a need has arisen for new machines and processes to use in bringing the product to market and sustaining it. These machines and processes are the subject of the present invention.

A. Real and Personal Property

As an example, in the case of property that is customarily leased by corporations, leased and unleased property have different investment characteristics. Ownership of leased property is a fixed-income asset with investment characteristics that depend upon lease covenants, the market for corporate debt, and the lessees' credit ratings. By contrast, ownership of unleased property is a speculative asset having investment characteristics that depend on the spot rental market for that type of property. Thus it is possible to split ownership of this type of property into at least two components, at least one of which is a fixed-income asset.

Consider real estate, for example, which can be divided into an estate for years and a remainder interest. Lenders can purchase the estate for years outright instead of writing a commercial mortgage on the whole property. Alternatively, a trust can be established with the lenders as sole beneficiaries of the trust, and the trust can purchase the estate for years. The other component--the remainder interest--can be purchased by real estate investors (or, again, a trust with those investors as sole beneficiaries) in lieu of the standard investment approach, in which the investor would purchase all rights to the property using some funds from a commercial loan. The term of the estate for years can be determined by parameters that describe the property, in particular by the remaining lengths of the terms of the existing leases.

If the property is fully leased (or is almost fully leased), and the leases will not expire until after the estate for years has expired, then the estate for years has the investment characteristics of a fixed-income asset rather than of property. Under these circumstances, at least for real estate, insurance companies are allowed by regulators to treat the estate for years as a fixed-income investment, and to compute its value accordingly. In other words, the insurance companies value the estate for years based on cash flow characteristics of the leases and credit ratings of the tenants, and not based on the value of real estate or the risk in the real estate markets.

Due to an interplay of values for the property components and the needs of respective purchasers, including tax needs, it is frequently possible to sell the components of the property separately for more than the price that the property as a whole would command.

From the perspective of an investor who acquires the remainder interest, a purchaser of the estate for years has accepted an assignment of the lease payments for the term of the estate for years in return for financing the acquisition of the property by the remainder interest purchaser. From this perspective, the amount of financing provided is equal to the purchase price of the estate for years, the lease payments during the estate for years term completely amortize the financing, and the length of the financing term equals the term of the estate for years.

Unlike traditional mortgage finance, shorter financing terms (less than fifteen years) are not a problem under this structure for the remainder interest investor, because: (1) during the estate for years term, the investor does not incur any tax liabilities; and (2) taking possession of the property upon expiration of the estate for years is not a taxable event for the investor. In other words, the investor does not have any tax liability until there is an obligation to pay taxes on rent payments received after taking possession of the property at the expiration of the estate for years, and those rental payments provide the cash to meet the taxes due on those payments. Therefore, the estate for years term is irrelevant to the remainder interest investor, except insofar as the term determines the amount of financing the estate for years purchaser provides (the longer the estate for years term, the greater the amount of financing). In addition, upon expiration of the estate for years, the remainder interest investor owns the property outright (i.e., without any debt).

From the perspective of a financier, this financing product has no claim on the property investor (i.e., the remainder interest investor), but the strongest possible direct claim on the tenants, because the financier is the owner of record during the estate for years term. In other words, this financing product is more efficient than a commercial mortgage at matching the legal recourse claims in event of default with the asset that is actually being financed: tenant promises to pay future rent. The estate for years term can be as long as the existing leases are committed to run--typically ten years or less, although sometimes longer in the case of property that is fully leased for long terms.

In addition, ownership can be structured so that the transaction creates the estate for years and the remainder interest, in order to create the most favorable tax consequences for the financier and the property investor.

B. Tax-exempt Finance

Separating property into at least two components along a time dimension (e.g., into an estate for years and a remainder interest) can also be used to enhance the investment value of tax-exempt securities such as tax-exempt general obligation bonds, tax-exempt industrial revenue bonds, and tax-exempt leases. This separation can be applied either to individual securities or to pools of tax-exempt securities. Value enhancement can be achieved in two ways: (1) cash flow streams from the components can appeal to investors who would not be interested in the entire cash flow stream of the original asset, and (2) the combined tax shelter benefits that accompany the components can be greater than the tax shelter benefits associated with the original asset. Both effects are significant, though in some situations, the tax effect will be the more dramatic of the two.

Unlike the example of taxable leased property discussed above, for the tax-exempt property example, both components can be viewed as fixed-income securities. one would expect that these fixed-income securities would be valued by investors in the marketplace by comparison with other fixed-income securities.

For tax-exempt securities, to effect a successful change in cash flow tax benefits from splitting the property or asset into components, one can proceed indirectly in separating the asset into components. Rather than directly separating ownership of the tax-exempt security itself, it is better to create a partnership to hold the tax-exempt security, and then to separate one or more of the partnership interests along the time dimension into estate for years and remainder interests.

From a legal perspective, creating tax-exempt components can be accomplished within the framework of general or limited partnerships. However, to create limited-liability components, smooth the cash flow streams, and avoid an imposition of unusual bookkeeping requirements on fixed-income investors, the limited partnership is the preferred format, with the limited partnership interests as the assets that are subject to component separation. To enhance marketability of the components, and to facilitate investor valuation of the components by comparison with alternative fixed-income investments available in the marketplace, general partners may alter the frequency of cash flows to the components from schedules of the original assets (e.g., the original assets could generate monthly cash flows, and the components could generate semiannual cash flows).

In general, component separation will produce two effects; (1) the estate for years components will generate more tax deductions than are necessary to shelter the cash flows of this component from taxes; and (2) the remainder interest component will generate fewer tax deductions than are necessary to shelter the cash flows of this component from taxes (the tax obligations associated with the remainder component typically will still be lower than those associated with a conventional taxable fixed-income security). It is also possible that, in some situations, purchasers of taxable securities may view remainder interests as taxable securities and value those interests more highly than investors in tax-exempt securities.

The combined investment value of the tax deductions generated by the various components may be greater than, equal to, or lower than the tax deductions associated with the original tax-exempt asset(s). Since creating a partnership to hold the original tax-exempt securities requires a diversion of a portion of the asset cash flow stream to pay administrative expenses associated with maintenance of the partnership, component separation of tax-exempt securities is likely to be of interest only when the combined value of tax deductions generated by the components exceeds tax deductions associated with the original tax-exempt asset(s).

In general, determining a schedule of economic benefits associated with various partnership shares, valuing the tax deductions associated with the components, and pricing of the components as fixed-income securities, are computation-intensive procedures.

C. Automated Support

To efficiently offer the above-described financial products, it would be best to use automated means to do computing and data processing, i.e., machine, manufacture, and process applied to supporting the proper structuring and pricing of the components. Efficiency also dictates a need to use automated means to incorporate the computational output in generating financial documents associated with a separated purchase transaction.

Therefore, the invention has an object providing a machine, manufacture, and process for providing applied to financial analytical data automation, including pricing data, for the decomposition of property.

A further object of the invention is to provide the same applied to supporting a new financing product that is based on providing financing of preferably fifteen years or less, while also allowing taxable investors to avoid tax problems encountered with typical mortgage financing.

Another object of the invention is to provide the same applied to calculating financial particulars of the property based on the concept that the source of property value is property rights that can be split and separately valued.

Another object of the invention is to provide the same applied to using the financial particulars in efficiently tailoring financial documents to support transactions involving property components.

Another object of the present invention is to provide the same applied to real estate as the property.

Still another object of the invention is to provide the same applied to supporting the decomposition of real estate into an estate for years and a remainder interest, particularly for computing the price, including tax, of these components.

Still another object of the invention is to provide the same to computing the after-tax yield for the estate for years and the equivalent pretax yield that would be required to obtain the same after-tax return from a bond.

Yet another object of the present invention is to provide the same applied to partnership interests in tax-exempt securities or pools of tax-exempt securities as the property.

Yet another object of the invention is to provide the same applied to supporting the decomposition of partnership interests in tax-exempt securities or pools of tax-exempt securities into estate for years and remainder interests, particularly for computing the price, including tax, of these components.

Still another object of the invention is to provide the same applied to analyzing the returns offered based on certain assumptions to inform potential investors of the range of outcomes as they relate to certain inputs.

Still another object of the invention is to provide the same applied to generating data so that comparisons can be made to alternative investment opportunities.

These and other objects are addressed by a digital computer having a logic means for controlling electrical signal processing and modification. The logic means can be completely hard wired or it can be programmable so that one or more computer programs can run on the digital computer. Preferably an embodiment includes a computer program running on a programmable digital computer system to provide financial analytical data concerning decomposed property. The computer system is connected to receive information representing a description of the characteristics of the property from a data input means, such as a keyboard. The computer system also outputs computed data and documentation to an output means and saves the output financial analysis to a memory system. The computer system also has a second means for automatically controlling the digital computer to produce financial documents from the financial analysis and model documents stored in the memory system.

The computer system uses as input data information obtained from a variety of sources, including the Wall Street Journal tabulation of daily Treasury bond interest rates, insurance company weekly publications that list private placement debt risk premia, the property offering documents, and the property lease documents. For applications to tax-exempt finance, the computer system also uses tax-exempt bond finance interest rates tabulated and published daily by such sources as Telerate Systems.

With this information, it is possible to compute the following: (1) the optimal choice of the estate for years term to maximize profitability of the components; (2) whether risk characteristics of either component are appropriate for inclusion in a prospective investor's portfolio; and if so, (3) whether an expected return justifies the system-determined purchase price.

IV. BRIEF DESCRIPTION OF THE DRAWINGS AND SPECIMENS

The aforementioned and other objects and features of this invention and the manner of attaining them will become apparent, and the invention itself will be best understood, by references to the following description of the invention in conjunction with accompanying figures and specimens.

A. Figures

FIG. 1 is a graphic representation of a separated purchase transaction in accordance with the present invention.

FIG. 2 is a diagram representing the electrical computer system and its input and output in accordance with the present invention.

FIG. 3 is a flow chart showing the logic of a logic means for controlling the electrical computer system in accordance with the present invention.

FIG. 4 is a flow chart showing the data input, computational and other logic, and data output of the logic means for controlling the computer system in accordance with the present invention.

FIGS. 5a-5d is a flow chart showing the data input, computational and other logic, and data output of the logic means for controlling the computer system in accordance with the present invention as applied to tax-exempt property.

FIG. 6 is a graphic representation of interlated computer systems, in accordance with the present invention.

B. Specimens

Specimen 1 (Screens 1-3) is a series of computer screens constructed by the computer system, in accordance with the present invention.

Specimen 2 (Screens 1-4) is a series of four computer screens constructed by the computer system, for another embodiment in accordance with the present invention.

Specimen 3 is an example of a financial document for an estate for years real estate component constructed based on data in the data table and by means of the computer system, in accordance with the present invention.

Specimen 4 is an example of a financial document for a remainder real estate component.

V. DETAILED DESCRIPTION OF A PREFERRED EMBODIMENT OF THE INVENTION

A. Financial Innovation

FIG. 1 illustrates the nature of the financial innovation that gave rise to the need for the computer system and methods of the present invention. Rights to a Subject Property 2 (any property whatsoever, but in a preferred embodiment, real estate) are leased to a Lessee 4, preferably an investment-grade lessee, for a definite term, in exchange for rent. All rights to the Subject Property 2 and cash flow from rent money from the Subject Property 2 are conveyed to an investor in an estate for years or to a trust that holds title to the estate for years and that--absent any competing claims--flows the rent money through to the investor. Financial Intermediary 6 separates the Subject Property 2 and cash flow of rent money into at least two components, using a computer system and methods of the present invention. The components are securitized into rights to an Estate For Years 8 and a Remainder Interest 10. The use of a financial intermediary facilitates the separation process but is not necessary in all cases.

The term of separation usually coincides with the remaining term on the existing tenant lease, and is almost never longer than the shortest remaining tenant lease term. The estate for years component can, therefore, be viewed as a fixed-income asset, but tax considerations may dictate whether the remainder component is viewed as a pure equity asset or as a mixture of pure equity and fixed-income.

When component separation takes place, Subject Property 2 is sold to the Financial Intermediary 6, and two trusts may be established to acquire actual titles to the respective components.

Any existing property debt is retired at, or prior to, the time of acquisition. An obligation of any trustee of the trust for the Estate for Years 8 is to preserve title to the estate for years and to prevent any property encumbrances from being established during the separation term.

If there is an estate for years trust, it has a term beneficial interest, and if there is a remainder interest trust it has a remainder beneficial interest. The term beneficiary has all rights and obligations of estate for years ownership during the trust term except a right to encumber the property or petition a court to terminate or dissolve the estate for years/remainder interest structure. A remainder beneficiary enjoys no rights or benefits until the term interest expires, and then enjoys all rights and benefits of the fee simple title.

In this case, the term beneficial interest becomes the (fixed-income) estate for years component, and the remainder beneficial interest becomes the remainder component.

The components are both viewed as personal property for legal purposes. Ownership of either component can be transferred without affecting the legal status or investment characteristics of the Subject Property 2 or the other component. Similarly, while legal judgments against the owner of either component can create a lien against that component, such judgments cannot create a lien against the Subject Property 2 or the other component.

For tax purposes, the estate for years holder is entitled to amortize the estate for years acquisition cost over the estate for years term. In most cases, straight-line amortization is appropriate.

Alternatively, the estate for years holder may be entitled to both depreciation and amortization deductions. In this case however, the value of the deductions is interleaved, not additive. That is, although the combined deduction would be greater than the amortization deduction alone, the combined deduction would be smaller than the sum of the amortization and depreciation deductions.

Whichever cost recovery deduction schedule is claimed by the estate for years holder, the tax treatment of the estate for years will be different from the treatment claimed by the holder of conventional taxable debt, because for tax purposes, the estate for years is an income-producing asset rather than a debt instrument:

If the estate for years component holder is a corporate investor, then the tax write-offs accruing from component separation are available to offset taxes on either passive or operating income.

Separation is facilitated if the lease(s) is triple-net, i.e., during the trust term, the lease(s) obligates the tenant to the estate for years component holder for property management and maintenance, payment of taxes, and property insurance. Thus, absent a default by a tenant, the rights and obligations of the estate for years component holder involve the right to receive scheduled net rental payments, while the benefits of property occupancy belong to the tenant. The only claim of the estate for years component holder on any property asset is a contingent one, in event of a tenant default.

In a tenant default, the estate for years component holder has recourse against the tenant as prescribed by property law and the lease covenants. This recourse against both tenant financial assets and the remaining portion of term property occupancy rights is the subject of traditional principles of property law. The availability of tax write-offs accruing from component separation continues unaffected by a tenant default event.

The default risk associated with the estate for years is identical to the default risk associated with tenant general obligation debt. The expected value of the combined estate for years default claims compares favorably with the claims available to the holders of tenant unsubordinated debentures.

Leased and unleased property have different investment characteristics. The nature of this difference can be illustrated by considering the extreme cases of two unleveraged general purpose single-tenant properties of similar size, location, and architecture, one perpetually leased on a triple-net basis to an investment-grade tenant, the other momentarily unleased.

In the case of the perpetually leased property, all future rental cash flows are determined. Absent tenant default, there will be no future rental negotiations. Thus, there are no present values that fluctuate with changes in the spot market for comparable space, implying that the value of this property does not depend on the real estate market. Property value in this case depends solely on the contracted values of future net cash flows, tenant credit risk, and long-term interest rates. In other words, this asset has the investment characteristics of tenant debt.

By contrast, all future rentals from the unleased property are as yet undetermined, and the present value of these rentals fluctuates with expectations about the future evolution of the spot rental market. In short, this asset is a pure real estate equity investment, with no fixed-income component.

Typical investment-grade property is not well represented by either extreme. Such property is usually fully leased or almost-fully leased for a reasonable period of time, with arrangements for tenant occupancy beyond that period open to future negotiation. As in the case of perpetually leased property, existing leases have the investment characteristics of fixed-income assets, whereas the speculative risk dimensions investors associate with equity real estate are due entirely to the remaining rights in the property asset: the right to future rental opportunities after existing leases expire.

By securitizing net-leased property to separate ownership of current leases from ownership of future leases, the net-leased property is decomposed into estates for years and pure equity remainders. The estate for years components are appropriate for investors interested in traditional fixed-income investments, while the pure equity remainders are appropriate for real estate investors, speculators, and tax-exempt institutions interested in acquiring portfolio diversification benefits of real estate at a fraction of the cost for all components of the real estate.

The separation of property into components can create major tax benefits if property is properly securitized and the components are sold to independent investors in a simultaneous three-way transaction.

As part of the undivided property, most of the lease cash flows are taxable income, while as a stand-alone asset, most of the lease cash flows are tax-exempt. This suggests a change in the appropriate buyers for lease income streams. As part of whole property, lease income produces the greatest after-tax benefit for tax-exempt institutions; whereas, packaged as stand-alone assets with incremental tax deductions, taxable institutions are natural investors.

The present value of the incremental tax deductions generated during the estate for years term by separation of ownership into components is an enhancement to property value. This implies that the combined market values of securitized components should be greater than the value of unsecuritized property. The tax deductions themselves can also be viewed as a fixed-income asset, which can be valued by fixed-income techniques. Alternatively, the combined value of incremental tax deductions and the lease income stream can be valued by fixed-income techniques as a single fixed-income package.

From a tax perspective, the estate for years is an income-producing asset; from the return/risk perspective, it is an asset-backed bond. Unlike commercial mortgages, the default claims generated by the estate for years have recourse against financial assets held by the entities who have obligated themselves to make the cash flow payments.

The example herein involves a single-tenant property; the case of multitenant property component separation is slightly more complicated if the lease terms of tenants vary. Because the estate for years must have the characteristics of a fixed income asset, it may be that a credit enhancing instrument will have to be created to wrap around the lease agreements to achieve the characteristics of a marketable fixed income asset. The use of such an enhancement may broaden the application of the separation process in both single-tenant and multitenant property by creating investment grade estate for year components in properties without investment grade tenants.

In the case of single-tenant property, the estate for years default risk is determined by the tenant credit rating. Thus, the estate for years default risk is identical to the default risk of tenant debentures. In the event of tenant default, the estate for years owner has the same claim on tenant financial assets as holders of tenant debentures, so long as the tenant does not declare bankruptcy.

In tenant bankruptcy, the estate for years holder has a combination of claims with combined values that can be shown to exceed the expected recovery rate on defaulted corporate debentures, as determined by average prices on publicly traded debentures immediately after default and by asset recovery rates subsequent to defaults on unsubordinated general obligation debt.

In other words, estate for years default risk is the same as default risk on general obligation tenant debt, but in default the loss risk is less. This can be reflected in pricing the component, as illustrated below.

For example, one possibility is to generate investment-grade estates for years with between four percent (4%) and six and one half percent (6 1/2%) after-tax yields under current property market conditions. This is an after-tax premium of between 20 and 170 basis points over corporate debentures of comparable credit risk. Alternatively, this represents an approximate pre-tax equivalent premium of between 5 and 230 basis points for taxable buyers in a 36% marginal tax bracket.

These premia can be expected to erode slowly as the markets for the property components develop. Sellers will learn to value each component separately in arriving at property valuation. (To value each component, one could use separate computer systems to compute such valuation for each component separately. In effect, this approach is the invention disclosed herein divided into two computer systems, one for each component. Such an approach is viewed as an equivalent to the present invention.) In any case, eventually multiple bidders for estates for years will drive estate for years yield premia down to double or single-digit basis points. However, by placing the estates for years privately, dissemination of this embodiment of the investment technology may lag.

In short, when viewed as a financial asset, unleveraged commercial property is a portfolio comprised of at least two components with different investment characteristics: a fixed-income asset essentially all ownership rights while existing leases are in place, and a pure equity component essentially consisting of all ownership rights after existing leases expire.

B. Computer System

The present invention is directed to a computer system for manipulating digital electrical signals to produce an illustration of a decomposition of property into separately valued components. The computer system includes a digital electrical computer controlled by a processor. A first logic means controls the processor in manipulating digital electrical signals representing input data to the computer, the input data characterizing at least two components decomposed from the property. The manipulating includes transforming the digital electrical signals into modified digital electrical signals representing respective values for each of the components, the values being computed to reflect taxation for the components. Input means is electrically coupled to the computer and operable for converting the input data (which can be entered manually) into the digital electrical signals and communicating the digital electrical signals to the computer. Output means is electrically coupled to receive the modified digital electrical signals from the computer and to convert the modified digital electrical signals representing the respective values into an illustration of the computed respective prices.

The computer system can additionally include a second logic means for controlling the processor in further manipulating the electrical signals, the further manipulating producing at least one financial document for one of the components, the financial document being constructed in response to electrical signals representing preexisting text and stored in memory accessed by said computer and in response to said modified digital electrical signals representing the respective values.

The computer system can be used in cooperation with one or more computer systems in respective locations to either recompute the computations (i.e., signal processing) discussed above or do supplemental computations (i.e., signal processing) as discussed below.

The property can be any property or divisible property right. Preferably, the property is real estate, but in another preferred embodiment, the property is a tax-exempt security.

More particularly, with reference to FIG. 2, the hardware, input, and output of a Computer System 12 according to the present invention are shown. The System 12 includes a Digital Computer 14, such as an IBM-compatible personal computer with a DOS operating system. Digital Computer 14 preferably has a model 486 central processor or a 386 central processor with a math coprocessor. Digital Computer 14 is operably linked to a Keyboard 16, for receiving Input Data 18 (described more particularly below with regard to FIG. 3) and converting it into electrical signals. Digital Computer 14 also is operably linked to output means, such as a Monitor 20 and a Printer 22 (such as a dot-matrix or laser printer) for outputting Financial Analysis Output 24 (described more particularly below with regard to Specimen 1) and Processed Component Financial Documents 26 (described more particularly below with regard to Specimens 3 and 4).

Digital Computer 14 is additionally operably linked to Memory System 28, comprising a means for storing Logic Means 30, such as a diskette or a hard disk, and a means for communicating the Logic Means 30 to the Digital Computer 14, such as a disk drive. Logic Means 30 can be a LOTUS 123 (Version 2.01 or higher) computer program, which is used to produce Specimen 1, though as described subsequently, a program dedicated to the purposes of this invention would be preferable.

When loaded and running on Digital Computer 14, Logic Means 30 controls the Computer System 12 transforming the electrical signals from Keyboard 16 into electrical signals associated with constructing files 32 (or records, if so desired) and of Financial Analysis Output 24. Storing a plurality of data files 32 would be appropriate, for example, for analyzing different separated purchase transactions or for analyzing how one or more changes in Input Data 18 influence the Financial Analysis Output 24.

Memory System 28 also stores a Word Processing Program 34, such as Word Perfect 5.1. Word Processing Program 34 is useful for constructing and editing text files to be printed via Printer 22 as Processed Component Financial Documents 26.

Preferably, one text file includes a Stored Model Financial Document For the Estate For Years 36, as exemplified in Specimen 2. Another text file includes Stored Model Financial Document For Remainder Component 38, as exemplified in Specimen 3. Still another text file includes Stored Other Financial Documents 37, detailed subsequently herein.

It is to be explicitly understood that other implementations of the present invention, say, those using a different kind of digital computer, analogous hardware, multiple computer systems, comparable input and output, a computer program or programs written in a different language, or a hardwired system replacing the computer program, are entirely acceptable and equivalent to the present invention. Also the invention can be implemented by hardwired logic in a handheld calculator. When software is loaded into, and running, a programmable computer, the software sets what in effect are many, many "switches," and the result can be considered a new computer machine, with logic formed from the set switches. Instead of setting the switches, an equivalent would be to hardwire the same or equivalent circuitry. Therefore, whether a configurable device is configured to the requirements of the present invention, or a device is constructed from scratch solely for meeting the requirements of the present invention, is a difference without a difference from an electrical signal processing standpoint. All these embodiments are different species of the present invention that are within the contemplated scope of the present invention.

C. Logic Means 30

Focusing more particularly on Logic Means 30, it should be recognized that System 12 is intended for a specific purpose, for operation under certain assumptions, to compute the values of components decomposed from property, and to provide documentation thereof; System 12 involves certain Input Data 18 and Financial Analysis Output 24, each of which is discussed below in greater detail.

1. Purpose

The Logic Means 30, in conjunction with the rest of System 12, is intended to facilitate financial transactions involving the separate components of property, preferably commercial real estate in a separated purchase transaction. For a separated purchase transaction to take place, the sum of the prices the two investors agree to pay for their respective components should theoretically be at least equal a price at which the owner is willing to sell the property.

Logic Means 30 partially automates financial considerations that take into account the different investment characteristics of the two components. This facilitates or reduces the cost for, carving a property value into respective values, which can be treated as prices, for the estate for years and the remainder interest. In addition, Logic Means 30, in conjunction with Digital Computer 14, calculates various financial parameters to assist prospective purchasers in deciding whether the components are suitable as investments at the respective sale prices.

Logic Means 30, in conjunction with Digital Computer 14, calculates throughout the estate for years the values and tax bases of the separate components so that the sale and purchase of each component may take place privately or through a financial exchange established to provide liquidity in a market in which none presently exists.

Further, Logic Means 30, in conjunction with Digital Computer 14, provides accounting support to the estate for years investor by computing, on both annual and quarterly bases, the tax deductions generated by the property and the estate for years. These deductions may be used by the estate for years investor to reduce taxes on income produced by the estate for years and in certain other taxable operations. Because these deductions affect the basis of the remainder interest upon expiration of the estate for years, the accounting support set forth is also necessary for the remainder interest.

Logic Means 30 can also be used in conjunction with Word Processing Program 34 to efficiently incorporate Financial Analysis Output 24 into Financial Documents 26 (and to edit and revise the stored Model Financial Documents 36 and 38 for each separate purchase transaction) for each of the components.

2. Assumptions

The Logic Means 30 is intended to support the separated purchase transaction of real estate in which the estate for years has a definite and specified term, and in which the property is leased for rent prior to the separated purchase transaction. For the estate for years to be an asset with fixed-income investment characteristics, the term of the estate for years is normally no longer than the shortest term remaining on the lease(s). That is, the estate for years entitles the holder to the right to receive the net cash flows from the existing leases until the end of the term. Furthermore, the risk of default on the scheduled cash flow(s) is determined by either the lowest-rated tenant credit risk or the value-weighted average credit risk of the tenants, with the former the norm.

In addition, it is assumed that ownership of the components is structured so that, after the separated purchase transaction, the purchaser(s) of the estate for years is (are) entitled to amortize the estate for years purchase price. Finally, it is assumed that any depreciation deductions are to be taken by the estate for years purchaser(s).

3. Pricing the Estate for Years

Under the above assumptions, the risk and return characteristics of the estate for years are those of a fixed-income asset. This implies that prospective investors will price the estate for years as a fixed-income investment, i.e., prospective purchasers will value the estate for years relative to comparable investments available in the bond market at the time of the separated purchase transaction.

Specifically, prospective purchasers of the estate for years will look at the available yield on Treasury securities of comparable cash flow characteristics for a comparable average life, add a risk premium based on the average credit risk of the tenants and, under present market conditions, probably add an additional premium due to the illiquidity of the investment. The sum of the appropriate Treasury rate plus the risk and the illiquidity premiums is a typical fixed income market discount rate for the estate for years.

4. Input Data 18

Generally, in order to value the estate for years as a fixed-income investment, a schedule of net cash flows during the estate for years term is determined. Typically, this will comprise a stream of scheduled monthly net rental payments. If the estate for years does not begin on the first day of a month and terminate on the last day of a calendar month, net rental payments could also include fractional monthly rental payments for the first and last months of the estate for years term. In addition, the date of the split purchase transaction, and the date that the estate for years terminates, are also entered as Input Data 18.

Estate for years valuation also includes the appropriate discount rate for the estate for years. But instead of inputting this number directly, the Logic Means 30 prompts a request (as Input Data 18) the appropriate annualized Treasury bond interest rate for bonds of an equivalent average life to the estate for years, plus an appropriate risk/illiquidity premium, as discussed above.

To compute the remainder interest purchase price, the property sale price, together with any extra expenses (i.e., fees and commissions) arising in the securitization of the real estate components, are also entered as Input Data 18.

To estimate the depreciation and amortization deductions to which the estate for years purchaser is entitled, the Logic Means 30 assumes that the percentage of the property purchase price represented by land is not depreciable, but that the remaining portion of the purchase price is depreciable, as prescribed by the tax code. Thus, the Logic Means 30 requires the user to enter the percentage of property value that is not depreciable and the amounts and depreciation schedules for the remaining portions of the purchase price.

To project the after-tax cash flows of the estate for years investor, and hence this investor's projected after-tax income rate, the Logic Means 30 also uses the projected tax bracket schedule of the estate for years investor as Input Data 18.

To calculate the implied purchase price of the property for the remainder interest buyer at the time the estate for years expires, the Logic Means 30 further uses an implied risk-free opportunity cost of capital for the remainder interest buyer, typically though not necessarily the zero-coupon risk-free Treasury rate for the estate for years term, as Input Data 18.

5. Elements of the Financial Analysis Output

Elements of the Financial Analysis Output 24 of Logic Means 30 include (1) a representation of the price for the estate for years component, and (2) a representation of the price for the remainder interest component. The price an estate for years investor is willing to pay can be computed from the net rental cash flows, the interest rates in the bond markets, and the credit ratings of the tenants. The Logic Means 30 discounts the sequence of net rental payments scheduled during the estate for years term at the required estate for years discount rate to determine an appropriate purchase price for the estate for years. The price a remainder interest investor must pay is computed as the difference between: (1) the sum of the property asking price plus the costs and fees associated with separating the components, and (2) the estate for years valuation. This formula follows because between them the purchasers of the components must come up with the property asking price together with any extra expenses associated with creating the components. If these prices are acceptable to prospective component purchasers, then a separated purchase transaction of the real estate interests can be consummated.

6. Additional Output

In one embodiment of the invention, Logic Means 30 can have Compute Present Value of Enhancement 117, which computes the present value of the enhancement in property value due to component separation. This value is computed as the difference between the present value of the estate for years after-tax cash flows, and the after-tax cash flows the estate for years would generate if the estate for years were still a part of undivided property and subject to the same tax deductions available to the owner of undivided property. The discount rate used to compute this present value is the after-tax income yield rate for both sets of cash flows.

Logic Means 30 outputs the present value of the enhancement in two forms: expressed as a dollar amount, and expressed as a percentage of the gross property sale price.

The present value of the enhancement must be greater than the cost of extra fees and commissions due to securitization, in order for component separation to be a value-enhancing process.

Value enhancement is a rough measure of the attractiveness of component separation in each prospective transaction. However, it is not used directly in pricing components, nor in preparing documentation describing investment characteristics of the components.

7. Computer Screens and Logic

A preferred embodiment of this invention would involve a stand alone computer and a computer program (Logic Means 30) stored on a hard disk (of Memory System 28) of a 486 Personal computer (Digital Computer 14). Unlike a hardwired equivalent embodiment, a programmable Computer System 12 is more readily adaptable to produce whatever output a user of Computer System 12 may desire with respect to a prospective separated purchase transaction. The preferred programming language is structured BASIC, although C, Fortran, or any other language with mathematical formulaic capabilities is acceptable. The operating version of the computer program for users should be in compiled code.

The Logic Means 30 includes Shell 40, which permits the option of accessing Word Processing Program 34 or a Title Screen 42 of a data processing system. Title Screen 42 informs the user of the name and ownership of the Logic Means 30, notice of any copyrights or patents that involve the invention, etc.

The Title Screen 42 leads to a Menu 44 screen created by Computer System 12 to query the user as to whether the user wants to retrieve one of the Data Files 32 stored from a previous run of the Logic Means 30 that the user saved in Memory System 28 or to create a new data file to become a new one of the stored Data Files 32. If the user makes a menu selection indicating that the Logic Means 30 should retrieve one of the stored Data Files 32, the Logic Means 30 asks on a Retrieve Stored Data File Screen 46 for the name and directory of the selected Data File 32. Block 48 performs the function of recalling the appropriate one of Data File 32.

Otherwise, the user can make a menu selection at Block 44 to create a New Data File 50. Regardless of which of these selections is made, Logic Means 30 displays a Data Form 52 like Screen 1 of Specimen 1, which will either have blank spaces to receive Input Data 18 to fill in the Data Form or will already be completed as a stored Data File 32. Specimen 1, Screen 1, herein is a representation of a completed data form. This representation, which is illustrative only, invol