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Additional Transfers to the Kerr Children
On December 31, 1994, petitioners each transferred a .085-
percent class B limited partnership interest in KILP to each of the
Kerr children. On December 31, 1995, petitioners each transferred
a .09375-percent class B limited partnership interest in KILP to
each of the Kerr children.
Petitioners' Federal Gift Tax Returns
Petitioners filed Federal gifts tax returns for 1994 in which
they reported gift tax liabilities attributable to the transfers
that they made to the GRAT’s trustees and to their children. In an
appraisal report (attached to the returns) prepared by Howard
Frazier Barker Elliott, Inc., petitioners determined the fair
market value of the KFLP class B limited partnership interests that
they transferred to the GRAT’s trustees by applying a 25-percent
discount for lack of liquidity or marketability to the value of the
KILP interests held by KFLP, and a 17.5-percent minority-interest
discount and a 35-percent discount for lack of liquidity or
marketability on the net asset value of KFLP's assets. Petitioners
computed the fair market value of a 44.535-percent limited
partnership interest in KFLP as follows:
Total net asset value (KFLP) $3,196,366
Less class A capital account 10,000
3,186,366
Limited partnership percentage 44.535%
NAV of the interest 1,419,048
Minority-interest discount 17.5% 248,333
Marketable minority interest value 1,170,715
Discount for lack of marketability 35.0% 409,750
Fair market value 760,965
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