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account the true marketplace and the price that would be paid by
a willing buyer.
The 25-percent discount used by John’s estate was based on
the return preparers’ analysis of a court opinion in which a
discount for a fractional interest was found.6 When the return
preparer increased the amount to 50 percent, he relied on a
series of court opinions in which discounts for fractional
interests were allowed.7 Although it may be appropriate to
consider the amounts of discounts decided by courts in prior
cases, those discounts are not intended as minimum or maximum
limits for certain types of discounts.8 The amount of discount
6 John’s estate’s tax return preparer relied on Estate of
Bright v. United States, 658 F.2d 999 (5th Cir. 1981).
7 The preparer, in support of a 50-percent discount in the
amended return, relied on a series of cases of which the
following are representative: Propstra v. United States, 680
F.2d 1248 (9th Cir. 1982); Estate of Campanari v. Commissioner, 5
T.C. 488 (1945); Estate of Cervin v. Commissioner, T.C. Memo.
1994-550; LeFrak v. Commissioner, T.C. Memo. 1993-526; and Estate
of Youle v. Commissioner, T.C. Memo. 1989-138. We note that the
cited opinions appear to be relied upon for their general
rationale and not because 50-percent discounts were allowed.
8 The parties in estate tax cases often play a “valuation
game” and advocate high and low values to provide the finder of
facts with limits within which the parties may be satisfied with
the final decision. Because of that phenomenon, we may expect
that estates will report the lowest possible value, and that the
Commissioner will determine the highest possible value. Those
very dynamics may raise suspicion about the parties’ positions on
estate tax valuation issues. In this case, however, the facts
reflect that, initially, John’s estate was not playing the
“game”. Even after the “game” began, both John’s and Sarah’s
estates did not get up to speed until the trial had commenced.
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