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reserves confers the absolute power suggested by Beck. Thus, we
conclude that the terms of the agreements do not restrict control
to the extent of a minority interest.
Petitioner argues, in the alternative, that Fred Jr. had
virtual control over the housing partnerships because of his
options to buy decedent’s interests. As previously discussed,
the options must be disregarded in valuing those interests.
Beck also determined that a lack of marketability discount
of 25 percent should apply because there was no ready market for
the housing partnership interests and a seller would necessarily
suffer a period of illiquidity. Respondent concedes on brief
that a lack of marketability discount of 15 to 20 percent is
appropriate, but only where the income approach to valuation is
employed. However, as previously discussed, in this case the
income and net asset values are intertwined. Moreover, to
calculate the values in the notice of deficiency, Archer used a
lack of marketability discount for both asset and income-based
values of the housing partnerships. Further, we believe that
Beck makes a persuasive case that decedent’s interests would not
be readily marketable. He notes that they would be subject to
the irrevocable designation of Fred Jr. as managing partner.
Beck also cited the provisions in the partnership agreements that
grant a right of first refusal to nonselling partners and give
them 60 days to accept or reject the offer to sell, which he
interpreted as forcing a period of illiquidity on every selling
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