- 16 -
consideration of all of the evidence in the record, paying
special attention to the presence or absence of the factors
discussed in Rev. Rul. 77-287, 1977-2 C.B. 319.
The following factors favor a high lack of marketability
discount: (1) There was no public market for Deft's stock; (2)
Deft's profit margins were below the industry average; (3) all
stock in Deft was subject to a restrictive share agreement which
provided that a shareholder could transfer his or her stock to a
nonshareholder only after the shareholder offered the shares to
the remaining shareholders; (4) given the size and low
profitability of Deft, a public offering of the stock was
unlikely in the future; (5) the size of the interest is so large
that it may be hard to find potential buyers in the future who
could finance such a purchase; and (6) where not already
considered, Deft has large potential environmental liabilities.
Only one factor favors a low lack of marketability discount:
Deft had an historical favorable distribution policy (it
distributed most of the company's earnings to its shareholders
through higher-than-market compensation in the past).
We conclude that a 30-percent lack of marketability discount
is appropriate for the Deft stock. Of this 30-percent discount,
10 percent is attributable to Deft's potential environmental
liabilities. We shall apply the 30-percent lack of marketability
discount to the unadjusted value we determined under the income
method. We however shall apply only a 20-percent lack of
marketability discount to the unadjusted value we determined
Page: Previous 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 NextLast modified: May 25, 2011