- 43 -
interests. Estate of Jung v. Commissioner, supra at 442-443
n.11. Limited partnership interests may be analogized to a stock
interest in this respect. Harwood v. Commissioner, supra.
Similarly, courts have recognized a fractional interest discount
in valuing undivided interests, particularly when valuing real
property. Estate of Bonner v. United States, 84 F.3d 196, 197-
198 (5th Cir. 1996); Estate of Fawcett v. Commissioner, 64 T.C.
889, 900-901 (1975). The discount is an acknowledgment of the
restrictions on sale or transfer of property, when more than one
individual or entity holds undivided fractional interests.
Estate of Bonner v. United States, supra; Estate of Fawcett v.
Commissioner, supra.
We believe that such a discount was reflected in the trading
price of the partnership units. The units that were being traded
were limited partnership units. Limited partners in the
Partnership had no management power, limited voting rights, and
significant limitations on their power to remove the managing
general partner. Moreover, the units were newly issued. The
value of the assets that had just been transferred to the
Partnership was uncertain as evidenced by the large variance in
the values assigned to them by the various experts in this
case.18 In addition, most of the underlying assets consisted of
18This uncertainty is also reflected in the value estimates
that were made for petitioner prior to transferring the
Washington properties.
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