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rata portion of a 100 percent (controlling) interest in the
underlying net asset value.” Petitioner’s expert further
explained that discounts are used to reflect a lack of control
and/or marketability. A lack of control is the inability to
change corporate or business attributes (dividends, capital,
etc.). A lack of marketability is a reduced liquidity because of
no ready market for part of a closely held entity. The expert
then concluded that decedent’s interest in the property, because
it was held in the Liquidating Trust, had the same attributes as
an interest in a corporation or partnership and should be subject
to the same discounts. Following that conclusion and valuing the
Liquidating Trust interest as though it were a commercial or
investment activity, petitioner’s expert reached a 30-percent
discount for lack of control and a 30-percent discount for lack
of marketability. After considering the sequential effect of the
two discounts at about 51 percent, petitioner’s expert opined
that 50 percent was the appropriate combined discount for the
lack of marketability and control.
Respondent’s expert considered language contained in the
Liquidating Trust that limited its purpose to the efficient
liquidation of the trust property and the general prohibition
from engaging in a trade or business. Although respondent’s
expert generally agreed with petitioner’s expert’s methodology,
respondent’s expert deemed petitioner’s approach irrelevant,
because the purpose of the trust was to liquidate assets and it
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Last modified: May 25, 2011