- 42 -
1989-231; see also Estate of Simplot v. Commissioner, 112 T.C. at
176-179.
Control is an element which must be taken into account for
purposes of determining the fair market value of corporate stock,
over and above the value attributable to the corporation’s
underlying assets using traditional valuation methodologies. See
Philip Morris, Inc. v. Commissioner, 96 T.C. 606, 628 (1991),
affd. 970 F.2d 897 (2d Cir. 1992). The rationale for applying a
control premium is:
The payment of a premium for control is based on the
principle that the per share value of minority
interests is less than the per share value of a
controlling interest. A premium for control is
generally expressed as the percentage by which the
amount paid for a controlling block of shares exceeds
the amount which would have otherwise been paid for the
shares if sold as minority interests * * * [Estate of
Salsbury v. Commissioner, T.C. Memo. 1975-333; citation
omitted.]
Before analyzing the positions of each party, we note the
facts that: (1) Cyril had a higher percentage of voting control
in JM than Joseph prior to the 1951 Agreement, and Cyril’s total
shares were worth more outright under either party’s valuation
standards; (2) Cyril received only a life estate in one-half of
Joseph’s shares, although he obtained voting control of all of
Joseph’s shares; (3) Cyril was required to transfer his shares to
his children on his death and could not dispose of the shares
during his lifetime for his own personal gain; and (4) under the
1951 Agreement, Joseph agreed to will his shares to Cyril’s
Page: Previous 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 NextLast modified: May 25, 2011