There are a couple of options. If there are applicable financial statements within the meaning of Section 1.475(a)-4(h), the value so reported can be used. Alternatively, calculate the present value of the leased property. (The aggregated of the present value of all future lease payments where the discount rate is equal to the AFR. This is to be determined at least in inception and used for all subsequent testing periods.)
If your entity's financial statements are prepared according to GAAP ((generally accepted accounting principles) and require an assignment of value to the lease, then the value reported for the lease for the reporting period in which a testing date occurs can be used for the 70% test. Alternatively (or if the foregoing doesn’t apply), you can value the lease by calculating the net present value of the payments under the lease as of the date of the lease's inception, using the short-term AFR as a discount rate and including pre-defined rent payments over extension periods. Once calculated, this value applies for all 70% tests. Accordingly, if the leased asset is a "good" asset for purposes of the 70% test, this second, alternative approach would probably provide a better result, because it does not decline over time.
You get to value the lease at its net present value, which is calculated as the sum of the stream of payments over the full lease period discounted by the AFR.
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