- 22 -
We conclude that Conklin was acting as an advocate and that
his testimony was not objective. However, despite the flaws in
petitioners’ expert’s testimony, we believe that some discount is
proper, in part to take into account material in the record
relating to closed-end bond funds. We hold that the fair market
value of an interest in the Knight family partnership is the pro
rata net asset value of the partnership less a discount totaling
15 percent for minority interest and lack of marketability.
Thus, on December 28, 1994, each petitioner made taxable gifts of
$789,030 (44.6 percent of $2,081,323, reduced by 15 percent).
E. Whether Section 2704(b) Applies
Respondent contends that Article 14 (the 50-year term or
dissolution by agreement of all partners) and Article 9 (the lack
of withdrawal rights for limited partners) of the partnership
agreement are applicable restrictions under section 2704(b)
because sections 8.01 and 6.03 of Texas Revised Limited
Partnership Act (TRLPA), Tex. Rev. Civ. Stat. Ann. art. 6132a-1
(West Supp. 1993), are less restrictive. We disagree. See Kerr
v. Commissioner, 113 T.C. 449 (1999).
If a transferor conveys to a family member an interest in a
partnership or a corporation which is subject to an “applicable
restriction”, and the transferor and transferor's family members
control the entity immediately before the transfer, the
restriction in valuing the interest shall be disregarded. See
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