- 201 -
Commissioner, 79 T.C. at 953, because a minority interest holder
lacks control over company policy, cannot direct payment of
dividends, and cannot compel a liquidation of company assets, see
Estate of Newhouse v. Commissioner, 94 T.C. at 249; Harwood v.
Commissioner, 82 T.C. at 267. Applicability of minority
discounts depends on the type of interest being appraised (i.e.,
degree of control the interest confers) and on any assumptions
regarding control that are implicit in the entity-level
valuation.
For estate tax purposes, the property being valued is the
interest decedent owned at death. See sec. 2031. We arrive at
this value by examining the degree of control inherent in the
decedent’s interest and not the control conveyed to the
decedent’s legatees. See Estate of Chenoweth v. Commissioner, 88
T.C. 1577 (1987). We determine whether a block of stock is a
minority interest without considering the identity and prior
holdings of the transferee, because the hypothetical willing
buyer-willing seller test is an objective test. See Estate of
Watts v. Commissioner, 823 F.2d 483, 486-487 (11th Cir. 1987),
affg. T.C. Memo. 1985-595; Estate of Bright v. United States, 658
F.2d 999, 1005-1006 (5th Cir. 1981).
We find the 25-percent minority discount applied in Mr.
Lax’s reserves method analysis to be unsubstantiated and
unreliable. The final Lax report vaguely described studies of
Page: Previous 191 192 193 194 195 196 197 198 199 200 201 202 203 204 205 206 207 208 209 210 NextLast modified: May 25, 2011