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5. Discounts for Stock of Kosman, Inc.
The experts applied the following discounts:
Petitioner's Respondent's
Discount Expert Experts
Voting &
nonvoting stock
Minority interest 10 percent 10 percent
lack of market- 25 percent 10 percent
ability
Nonvoting stock
Lack of voting 10 percent 4 percent
power
a. Minority Interest Discount
Both parties' experts applied a 10-percent minority interest
discount to value the voting and nonvoting Kosman, Inc., stock
that petitioner gave to her children. We apply a 10-percent
minority discount.
b. Lack of Marketability Discount
Petitioner's expert applied a 25-percent marketability
discount to the stock of Kosman, Inc. He cited a 1971 Securities
and Exchange Commission (SEC) study of sales of restricted stock
by over-the-counter publicly owned companies in which the stock
was discounted for lack of marketability by 30 to 40 percent. He
said that the SEC study suggested use of a significant discount
here.
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