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that the approximate average of those results provides a reliable
benchmark for the transferred interests. Absent any analytical
support, we are unable to accept that premise, particularly in
light of the fundamental differences between an investment
company holding easily valued assets (such as the partnership)
and the operating companies that are the subject of the
restricted stock studies.
3. Analysis of Respondent’s Expert
Unfortunately, Mr. Burns does not offer a satisfactory
alternative to the inadequate analyses of petitioner’s experts.
Following a brief analysis of six factors “that may influence the
size of the marketability discount”, he concludes in his written
report:
It is reasonable to assume that a negotiation between
buyer and seller would initially focus on a discount
for lack of marketability in the range of 5% to 25%. A
discount above this range would not be justified for a
conservatively-managed partnership holding highly
liquid marketable securities and cash investments;
while a discount below the range would ignore the costs
and effort that might be required to find a willing
buyer. I believe that a fair outcome of such a
negotiation between buyer and seller would entail an
adjustment of approximately 15% to reflect
marketability concerns.
In his testimony at trial, Mr. Burns confirmed that the
lower limit of his suggested range of discounts (5 percent)
represents the typical sales commission charged by brokers of
interests in private limited partnerships. However, he also
testified that an additional discount (unspecified in degree)
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