- 30 -
percent interest in Dunn Equipment, before application of
appropriate discounts, is $3,533,623.
III. Discounts
The parties agree that a 15-percent lack of marketability
discount is appropriate.13 Further, respondent concedes that a
7.5-percent discount for lack of super-majority control, i.e.,
for the fact that the stock in issue is less than 66-2/3 percent,
is also appropriate. Petitioner argues on brief for a 10-percent
discount for lack of super-majority control. Neither Mr. Frazier
nor Mr. Pratt provided support for a discount for lack of super-
majority control, and petitioner offers no evidence supporting a
discount greater than 7.5 percent. We apply a discount of 7.5
percent for lack of super-majority control. Therefore the
discounts, in total, equal 22.5 percent.
IV. Conclusion
We have calculated an undiscounted value of petitioner’s
62.96-percent interest in Dunn Equipment on the date of
decedent’s death of $3,533,623. Applying a 22.5-percent discount
to this figure, we find that the fair market value of the stock
in issue for purposes of the Federal estate tax is $2,738,558.
13 On brief, respondent agreed that the lack of
marketability discount could properly be applied to the earnings-
based value. Further, respondent agreed that the lack of
marketability discount could properly be applied to an asset-
based value generally but argued that it should not be applied to
liquidation value. As we have not used liquidation value, we
need not address respondent’s argument.
Page: Previous 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 NextLast modified: May 25, 2011