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2. Marketability Discount
Where appropriate, this Court has on numerous occasions
applied a discount for lack of marketability in valuing shares of
stock in a closely held company. See, e.g., Estate of Jung v.
Commissioner, 101 T.C. 412 (1993); Estate of Furman v.
Commissioner, T.C. Memo. 1998-157; Mandelbaum v. Commissioner,
T.C. Memo. 1995-255, affd. without published opinion 91 F.3d 124
(3d Cir. 1996); Estate of Lauder v. Commissioner, T.C. Memo.
1992-736. On brief, petitioner argues that it is entitled to a
10-percent discount for lack of marketability. Neither report of
petitioner's two experts addresses a marketability discount
directly. Mr. Buck's report does contend that the existence of a
3-percent minority shareholder would cause a 10-percent discount
from the price that a willing buyer would otherwise pay for a 97-
percent interest in Johnco. Mr. Buck does not characterize such
a discount as one for marketability, and we agree. We
characterize such a discount as a nuisance discount and address
it separately, infra.
Only respondent's expert report addresses marketability
directly. Although often closely related, "marketability" and
"liquidity" are not interchangeable terms. As respondent’s
expert argued, liquidity is a measure of the time required to
convert an asset into cash and may be influenced by
marketability. Marketability, on the other hand, is not a
temporal measure--it is a measure of the probability of selling
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