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the trust as a business entity and uses real estate business
examples (ostensibly comparable entities) to arrive at a 30-
percent discount. Respondent, on the other hand, depicts the
question of liquidity as a time value of money concept, rather
than a marketability discount issue. Using time-value concepts,
respondent arrives at a 9.5-percent discount to account for the
delay in realization of the liquidated value.
We do not find it necessary to resolve the debate about
which labels should be used. We simply hold that a willing buyer
would expect a discount for delay in the realization of the
liquidated value. In that regard, petitioner’s approach to
discounting is, in part, due to the fact that decedent had a
fractional interest. As explained above, because all of the
fractional-interest holders gave up their right to control the
liquidation of the property, the resulting effect is to enable
the trustee to liquidate without conditions or hindrances from
beneficial interest holders. Those circumstances would have the
effect of reducing any marketability discount. Considering both
approaches, we find that the agreed value of decedent’s interest
in the trust should be reduced by 15 percent to arrive at the
fair market value for purposes of determining decedent’s gross
estate and petitioner’s estate tax liability.
To reflect the foregoing,
Decision will be entered under
Rule 155.
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Last modified: May 25, 2011