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interests in AVLP. In calculating the additional discount,
Elliott relied on data found in various restricted stock and
initial public offering studies.
Elliott acknowledges that the secondary market for
syndicated partnerships is not a strong market and that a large
discount for lack of marketability is already built into the
secondary market discount. Although Elliott adjusts his analysis
of the data found in the restricted stock and initial public
offering studies to take into consideration the lack-of-
marketability discount already allowed, his adjustment is
inadequate. His cumulation of discounts does not survive a
sanity check.
Sections 8.4 and 8.5 of the AVLP agreement do not justify an
additional 20-percent discount. An option of the partnership or
the other partners to purchase an interest for fair market value
before it is transferred to a third party, standing alone, would
not significantly reduce the value of the partnership interest.
Nevertheless, the right of the partnership to elect to pay the
purchase price in 10 annual installments with interest set at the
minimum rate allowed by the rules and regulations of the Internal
Revenue Service would increase the discount for lack of
marketability. Texas courts have been willing to disregard
option clauses that unreasonably restrain alienation. See
Procter v. Foxmeyer Drug Co., 884 S.W.2d 853, 859 (Tex. App.
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