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Willamette Management Associates (Willamette) and the testimony
of Robert F. Reilly, the managing director of that firm.29 The
Willamette report concludes that a 30-percent “illiquidity
discount” would be appropriate.
We found the testimony of Mr. Reilly and Mr. McGraw to be
persuasive with respect to the propriety of an illiquidity
discount and their reports in this matter to be well reasoned.
The facts that PCAB was a small family company and the shares in
the company could not be sold without the approval of Pepsi-Cola,
Inc., favor the conclusion that some discount is appropriate.30
After carefully considering all the relevant evidence, including
the expert reports and testimony, we consider an illiquidity
discount of 25 percent to be appropriate.
Control Premium
As a general proposition, control is an element to be taken
into account for purposes of determining the fair market value of
corporate stock, over and above the value that is attributable to
29Mr. Reilly, among his other qualifications, has an M.B.A.
degree in finance from Columbia University Graduate School of
Business. He is an accredited senior appraiser as designated by
the American Socy. of Appraisers, a Chartered Financial Analyst,
a C.P.A., and he has coauthored a book entitled “Valuing a
Business”.
30A lack of marketability discount was applied in a similar
circumstance in Estate of Oman v. Commissioner, T.C. Memo. 1987-
71 (noting that it would be difficult to sell 75.6 percent of the
stock in a family company to an outsider, particularly with
decedent’s sons remaining active in the business, which justified
the application of a marketability discount).
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