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Respondent characterizes the True Oil interests as being
marketable and therefore proposes a 10-percent discount for
interests being valued as of January 1, 1993, and June 30, 1994,
and no discount (due to swing vote potential) for the interest
being valued as of June 4, 1994.
d. Court’s Analysis
A discount for lack of marketability reflects the absence of
a ready market for interests in closely held businesses. See
Estate of Andrews v. Commissioner, 79 T.C. at 953. The benchmark
for marketability of minority interests is the active public
securities market, where a security holder can quickly and easily
sell a minority interest at a relatively low cost. The minority
owner of a closely held company does not have similar liquidity,
because the pool of potential purchasers is substantially smaller
and securities registration requirements impose substantial
delays and transaction costs.
To determine appropriate marketability discounts, this Court
has considered fundamental elements of value that investors use
to make investment decisions. Some of the factors include: (1)
The cost of a similar company’s stock; (2) an analysis of the
corporation’s financial statements; (3) the corporation’s
dividend-paying capacity and dividend payment history; (4) the
nature of the corporation, its history, its industry position,
and its economic outlook; (5) the corporation’s management; (6)
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