- 33 -
1994). We express no opinion whether this election is
enforceable under Texas law. Because this clause would cause
uncertainty as to the rights of an owner to receive fair market
value for an interest in AVLP, a hypothetical buyer would pay
less for the partnership interest. See Estate of Newhouse v.
Commissioner, 94 T.C. 193, 232-233 (1990); Estate of Moore v.
Commissioner, T.C. Memo. 1991-546. We believe that an additional
discount equal to 8 percent for lack of marketability, to the NAV
previously discounted by 40 percent, is justified.
For the reasons set forth in the built-in capital gains
analysis for JBLP, an additional discount for lack of
marketability due to built-in gains in AVLP is not justified.
Although the owner of the percentage interests to be valued with
respect to AVLP would not exercise effective control, there is no
reason why a section 754 election would not be made. Elliott
admits that, because AVLP has relatively few assets, a section
754 election would not cause any detriment or hardship to the
partnership or the other partners. Thus, we agree with Burns
that the hypothetical seller and buyer would negotiate with the
understanding that an election would be made. Elliott’s
assumption that Elizabeth Jones and Susan Jones Miller, as
general partners, might refuse to cooperate with a third-party
purchaser is disregarded as an attempt to bootstrap the facts to
justify a discount that is not reasonable under the
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