Estate of Gladys J. Cook - Page 4

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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