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property worth $1,302,000 before transferring a 50-percent
undivided interest in the property to her brother. We held that
the value of the gift, the 50-percent fractional interest, was
“50 percent of the total less a 15-percent discount or $553,350.”
Thus, the property transferred by the donor was worth $97,650
less than it was in the donor’s hands. Similarly, in Estate of
Williams v. Commissioner, T.C. Memo. 1998-59, the owner of two
parcels of property transferred 50-percent undivided interests in
each of the parcels. We held that each of the two gifts in that
case should be valued as 50 percent of the fair market value of
the property less aggregate discounts of 44 percent. See also
Heppenstall v. Commissioner, a Memorandum Opinion of this Court
dated Jan. 31, 1949 (minority discount). These cases show
that, in appropriate cases, the minority discount and
fractionalized interest discount can be taken into account for
purposes of valuing direct gifts under section 2512(a). This
suggests that such discounts can also be taken into account in
valuing indirect gifts under section 2512(b). Otherwise, there
would be a difference in the application of the willing buyer,
willing seller standard depending on whether the valuation is of
a direct gift or an indirect gift.
As described above, in valuing the gifts of bank stock, the
majority opinion applied a minority interest discount to reflect
the fact that a willing buyer would pay less for the minority
interests in the three banks that petitioner transferred. In
valuing the leased land, the majority opinion applied a
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