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market for closely held stock and accounts for the fact that
closely held stock is generally not readily transferable. See
Mandelbaum v. Commissioner, T.C. Memo. 1995-255. A marketability
discount also reflects the fact that a buyer may have to incur a
subsequent expense to register the unlisted stock for public
sale. See Estate of Trenchard v. Commissioner, T.C. Memo.
1995-121. The estate must prove the presence and amount of a
marketability discount. Rule 142(a); Estate of Gilford v.
Commissioner, supra at 50-51.
Respondent did not call an expert at trial to support
respondent's determination that the value of the decedent's
Sterling preferred stock was $1,947,845. Respondent relies
mainly on Sterling's financial condition and Sterling's ability
to redeem the decedent's shares in accordance with the purchase
agreement. The estate counters that the fair market value of the
shares was $184,018. The estate called an expert, Herbert T.
Spiro (Mr. Spiro), to support this value, and the Court received
his report into evidence. See Rule 143(f). Mr. Spiro, who is
certified by the American Society of Appraisers, was a professor
of finance at California State University, Northridge,
California, from 1969 to 1988. He currently manages a
professional consulting organization which specializes in
economic feasibility assessment and financial analysis.
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