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(c) Discounts
The final issue we must resolve is the extent to which
discounts may apply to the interests being valued. Beck applied
a lack of control discount of 15 percent to decedent’s interests
in the housing partnerships because of the irrevocable
designation of Fred Jr. as managing partner thereof. In Beck’s
opinion, this irrevocable designation effectively surrenders a
degree of control which would otherwise be held by a 50-percent
general partner, and therefore places decedent’s interest in the
position of a minority partner interest. We disagree.
A minority discount will apply where a partner lacks
control, indicated by such factors as the inability to
participate in management, to direct distributions, or to compel
liquidation or withdraw from the partnership without the consent
of the controlling interest. See Estate of Bischoff v.
Commissioner, 69 T.C. 32, 49 (1977). Degree of control is the
critical factor in deciding whether the minority discount applies
and the amount of the discount, if any. See id.
We find that the terms of the partnership agreements do not
reduce decedent’s interests to the level of minority interests.
The partnership agreements for the housing partnerships contain
restrictions on a partner’s right of liquidation, termination,
and withdrawal, but the restrictions apply equally to all
14(...continued)
appraisal.
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