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appropriate “marketability discount” that should be applied to
the value of a 56.7-percent interest was 10 percent. Petitioner
filed the Coopers & Lybrand report in the District Court
litigation on or about December 10, 1996, in support of
decedent’s assertion that her interest in PCAB was worth
substantially in excess of what she received in the May 1, 1987,
redemption. The District Court litigation was settled out of
court in early 1998.7
OPINION
In May 1987, decedent and PCAB entered into a redemption
transaction designed to minimize decedent’s estate and gift taxes
and to achieve decedent’s other testamentary goals. The evidence
supporting this conclusion is explained more fully later in this
opinion.
Respondent contends that PCAB redeemed decedent’s shares in
PCAB for less than their fair market value, resulting in Nikita
Maggos’ owning 100 percent of PCAB. Respondent argues that this
transaction resulted in a gift to decedent’s son Nikita Maggos
that is subject to gift tax. Respondent’s measure of the gift is
7Pursuant to the terms of the settlement, Nikita Maggos paid
$1,400,000 and conveyed an apartment in Honolulu, Hawaii, to the
Estate of Mary Maggos, and the Estate obtained a release from the
counterclaims asserted by Nikita Maggos. Petitioner also
obtained an indemnity from Nikita Maggos for any gift tax
liability that might be due as a result of the May 1, 1987,
redemption.
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