Ina F. Knight - Page 20




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          this record, we believe some discount is appropriate based on an              
          analogy to a closed-end fund.                                                 
               Conklin cited seven studies of sales of restricted stocks                
          from 1969 to 1984 to support his estimate that a 30-percent                   
          discount for lack of marketability applies.  He used a table                  
          summarizing initial public offerings of common stock from 1985 to             
          1993.  However, he did not show that the companies in the studies             
          or the table were comparable to the partnership, or explain how               
          he used this data to estimate the discount for lack of                        
          marketability.  See Tripp v. Commissioner, 337 F.2d 432, 434-435              
          (7th Cir. 1964), affg. T.C. Memo. 1963-244; Rose v. Commissioner,             
          supra; Chiu v. Commissioner, 84 T.C. 722, 734-735 (1985).  He                 
          also listed seven reasons why a discount for lack of                          
          marketability applies, but he did not explain how those reasons               
          affect the amount of the discount for lack of marketability.                  
               3.   Conklin’s Factual Assumptions                                       
               Conklin listed 19 purported business reasons for which he                
          said the partnership was formed.  Petitioners claimed to have had             
          only 5 of those 19 reasons.10  Conklin also said: “The                        

               10  Petitioners’ five reasons are:  (a) Centralize control               
          of family investments; (b) avoid fragmentation of interests; (c)              
          consolidate family interests into one entity; and protect the                 
          children’s assets (d) from creditors and (e) in the event of a                
          divorce.                                                                      
               The 14 reasons Conklin gave but petitioners did not are:                 
          (a) Obtain better rates of return; (b) reduce administrative                  
          costs; (c) provide for competent management in case of death or               
                                                               (continued...)           





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