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percent limited partnership interest transferred to Mr. Dailey
had gift tax consequences at formation or funding.
Both parties agree that the given and retained interests
were, on December 8, 1992, and January 10, 1997, worth their
proportionate share of the NAV of $1,267,619 and $1,047,603 for
gift and estate tax purposes, respectively. They disagree,
however, about the size of the minority and marketability
discounts. Both parties’ experts compared the FLP to closed-end
mutual funds, which trade at a discount to NAV, but disagreed on
the amounts of the discounts. Petitioners’ expert, citing
published data, opined that the aggregate discount is 40 percent
for lack of marketability, control, and liquidity and testified
that he considered the significant amount of unrealized capital
gains relating to the Exxon stock.
Respondent’s expert, on the other hand, relied in part on an
unpublished study that he coauthored and, in a revised report
submitted at trial, increased the marketability discount
purportedly substantiated by his unpublished study from 12.5
percent to 14.1 percent. Respondent’s expert opined that an
aggregate discount of 15.72 percent on December 8, 1992, and
13.51 percent on January 10, 1997, should be applied. At trial,
respondent’s expert testified that he could not recall reviewing
the Agreement and, although he believed that unrealized capital
gains are “an important source of discounts”, he did not review
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