- 43 -
the corporation’s underlying assets using traditional valuation
methodologies. See Philip Morris, Inc. & Consol. Sub. v.
Commissioner, 96 T.C. 606, 628 (1991), affd. 970 F.2d 897 (2d
Cir. 1992). The sale of a 56.7-percent block of shares in PCAB
would deliver effective operational control to a purchaser and
would need to be considered as one of the factors affecting
value. See Estate of Chenoweth v. Commissioner, 88 T.C. 1577
(1987). While 56.7 percent of the shares would not command total
control of PCAB, it would give the purchaser operational control.
In other cases, we have found a control premium should be applied
in these circumstances. See also id.; Estate of Feldmar v.
Commissioner, T.C. Memo. 1988-429; Estate of Oman v.
Commissioner, T.C. Memo. 1987-71. As we stated in Estate of
Salsbury v. Commissioner, T.C. Memo. 1975-333:
The payment of a premium for control is based on the
principle that the per share value of minority
interests is less than the per share value of a
controlling interest. A premium for control is
generally expressed as the percentage by which the
amount paid for a controlling block of shares exceeds
the amount which would have otherwise been paid for the
shares if sold as minority interests * * * [Citation
omitted.]
Petitioner’s expert, Mr. Reilly, opined that the proper
control transfer premium was in the range from 34 to 38 percent.
Mr. Reilly’s report indicates he formed his opinion by
calculating the average control price premium paid in the
beverage industry over the years from 1982 to 1986. Mr. Reilly
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