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the market for some of those shares. As explained in an opinion of
the Court of Appeals for the Second Circuit authored by Judge
Augustus Hand:
It is common knowledge that sales of small lots of
stock on an exchange afford no reliable criterion of value
per share for large lots which if disposed of rapidly are
likely to flood the market and thus depress the price.
Every skillful broker who wishes to dispose of a block of
stock larger than the market is likely to absorb without
sacrifice in price will liquidate slowly by sales of small
units. If he disposes of the stock too slowly, he runs the
risk that a recession in current prices may occur and that
the prices of his sales may suffer on that account. If he
sells too quickly, he is likely to suffer from forcing an
amount of stock on the market which exceeds the normal
demand, so that purchasers will only buy at less than going
rates. That "the size of the gift of any security is not a
relevant factor" for consideration in determining market
value, as the Regulations in force in 1936 prescribed, is
quite contrary to experience. If the block is large enough
and the market thin, size under ordinary circumstances will
certainly count. To be sure some unusual factor like a
struggle for corporate control might cause a large block to
sell at a higher rate than would a small lot had no such
struggle begun, but the size of the block to be offered is
surely a matter for consideration in finding value.
[Groff v. Munford, supra at 827.]
This Court has expanded the concept of blockage to the sale of
other assets such as art, Calder v. Commissioner, 85 T.C. 713,
722-723 (1985) (market absorption discount applied to gifts of a
large number of works of art created by one artist); Estate of Smith
v, Commissioner, 57 T.C. 650, 658 (1972) (market absorption discount
applied to 425 works of art created by and kept in sculptor's
collection), affd. on other grounds 510 F.2d 479 (2d Cir. 1975);
Estate of O'Keeffe v. Commissioner, T.C. Memo. 1992-210 (market
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