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Third, as a practical matter, we observe that an annuity,
the value of which consists solely in a promised stream of fixed
payments, is distinct in nature from those interests to which a
marketability discount is typically applied. As the estate
acknowledges, discounts for lack of marketability are most
prevalent in valuation of closely held stock or fractional
interests in property. Such is appropriate in that capital
appreciation, which can usually be accessed only through
disposition, is a significant component of value. The value of
an annuity, in contrast, exists solely in the anticipated
payments, and inability to prematurely liquidate those
installments does not lessen the value of an enforceable right to
$X annually for X number of years.
In connection with the foregoing, we further note that any
attempted comparison to the “small market of those willing to
purchase unassignable lottery winnings”, which the parties
stipulated to exist, would be inapposite. Decedent died owning
an enforceable right to a series of payments. Yet any purchaser
buys only an unenforceable right and so is necessarily valuing a
different species of interest. What a LOTTO prize might be worth
to such a speculator hardly reflects its value in the hands of a
legitimate owner. Hence, because there is no market for the
precise interest held by decedent, the need for a standardized
approach becomes even more apparent.
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