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forced liquidation would reduce the amount that a hypothetical
buyer would be willing to pay for the interest. See Adams v.
United States, 218 F.3d 383 (5th Cir. 2000); Estate of Newhouse
v. Commissioner, 94 T.C. 193, 235 (1990). A marketability
discount would apply, but we believe that, under the
circumstances of this case, an 8-percent discount more accurately
reflects reality. This amount approximates the discount for lack
of marketability proposed by Burns with respect to AVLP, as
discussed below.
The experts also disagree about whether a discount
attributable to built-in capital gains to be realized on
liquidation of the partnership should apply. The parties and the
experts agree that tax on the built-in gains could be avoided by
a section 754 election in effect at the time of sale of
partnership assets. If such an election is in effect, and the
property is sold, the basis of the partnership’s assets (the
inside basis) is raised to match the cost basis of the transferee
in the transferred partnership interest (the outside basis) for
the benefit of the transferee. See sec. 743(b). Otherwise, a
hypothetical buyer who forces a liquidation could be subject to
capital gains tax on the buyer’s pro rata share of the amount
realized on the sale of the underlying assets of the partnership
over the buyer’s pro rata share of the partnership’s adjusted
basis in the underlying assets. See sec. 1001. Because the JBLP
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