- 44 -
finds the “average control price premium was 35.84 percent”. In
his report, Mr. Reilly then argues that the minority shareholder
would have to consent to any sale, and therefore the control
premium should be turned into a discount because the majority
shareholder would need to pay the minority shareholder to get
that consent. We find this reasoning unsupported by authority
and unpersuasive, especially in light of the fact that we
factored potential problems with the minority shareholder into
our determination of an appropriate illiquidity discount.
The transfer of 56.7 percent of the shares would allow day-
to-day control to the purchaser. Considering the level of
control transferred, we find that a control premium of 25
percent, rather than 34 to 38 percent that petitioner’s expert
calculated, would be more appropriate.
The application of both a lack of marketability or
illiquidity discount and a control premium has been found to be
appropriate in other cases. See, e.g., Hutchens Non-Marital
Trust v. Commissioner, T.C. Memo. 1993-600 (10 percent
marketability discount and 35 percent control premium); Estate of
Oman v. Commissioner, supra (20 percent marketability discount
and 20 percent control premium). The application of the control
premium and the marketability discount is offsetting in this
case.
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