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a. Nuisance Discount
Mr. Burns was critical of the nuisance discount sought by
petitioner. Traditionally, he noted, the potential actions of a
4-percent minority shareholder22 do not warrant any discount from
fair market value, but in practice, controlling interests are
often given a control premium for the power that they wield over
minority shareholders. According to Mr. Burns, the buyer of a
96-percent interest in Johnco would possess ultimate control over
the company's operations, while the possibility of the minority
shareholder’s causing problems for the new owner of the majority
interest was mere speculation.
b. Marketability Discount
Mr. Burns also disagreed with the views of petitioner's
experts concerning a discount for lack of marketability.
According to Mr. Burns, lack of marketability is a relative
concept; there is not one standard of marketability to which all
assets can be compared. Instead, assets must be compared to
their relevant market. While petitioner and its experts focused
on the marketability of Johnco stock in the market for the stock
of closely held corporations, Mr. Burns determined the timber
market to be the relevant market for assessing marketability,
22 Mr. Burns assumed Andrew was a 4-percent shareholder on
the valuation date based upon the number of Johnco shares
reported as owned by decedent on her Form 706; namely, 79,730
shares, or 96 percent, of the outstanding shares of Johnco.
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