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created as a unit and operated as a unit and were functionally
inseparable.
In valuing decedent’s 99-percent limited partnership
interest on the date of death, respondent’s expert applied an
8-percent minority interest discount and a 25-percent
marketability discount, to reach a combined (rounded) discount of
31 percent. Respondent’s expert valued decedent’s 47-percent
interest in Stranco by applying a 5-percent minority interest
discount and a 15-percent marketability discount, to reach a
combined (rounded) discount of 19 percent. Petitioner’s expert
applied a 25-percent minority interest discount and a 25-percent
marketability discount, resulting in an effective total discount
of 43.75 percent to the partnership. He did not value
petitioner’s interest in Stranco because he believed that the
relationship was irrelevant. In our view, his result is
unreasonable and must be rejected.
Respondent’s expert selected the lower minority interest
discount after considering the effective control of the limited
partnership interest and the interest in Stranco and considering
the detailed provisions of the partnership agreement and the
shareholders’ agreement. He examined closed-end funds, many of
which are traded on major exchanges, and determined the range of
discounts from net asset value for those funds. He selected a
discount toward the lower end of the range. His analysis was
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