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interests in the partnership were included in the gross estate at
a value of $1,529,749, the amount opined by the estate’s
valuation expert, Peter Phalon (Phalon).2 Phalon valued the
lottery payments at $4,575,000.
Respondent determined that the partnership’s right to
receive the lottery payments had a date of death value of
$8,557,850. Respondent arrived at this value using the annuity
table. Respondent then valued decedent’s limited partnership
interest at $3,222,919, allowing discounts for the lack of a
ready market, restrictions contained in the partnership agreement
on transfers and admissions of new partners, and the inability of
a 50-percent partner to control the partnership.
In response to respondent’s determination, the estate
employed a second expert, William H. Frazier (Frazier), to
prepare a valuation report on the lottery payments and the
partnership. Frazier valued the lottery payments at $6,053,189
and decedent’s interests in the partnership at $2,067,867.
Respondent employed his own valuation expert, Francis X. Burns
(Burns), to value the lottery payments and the partnership.
2 The parties stipulated $1,490,015, but the correct amount
appears to be $1,529,749. This discrepancy does not, however,
affect our decision.
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Last modified: May 25, 2011