- 236 -
for Jean True’s minority interest transferred as of June 30,
1994.
d. Court’s Analysis
As stated earlier, under Lauder III we disregard the buy-
sell agreement in determining fair market value of the subject
interests in Belle Fourche. See supra pp. 209-210. We consider
the agreement only to recognize that its existence demonstrates
the True family’s commitment to maintain control over Belle
Fourche. Accordingly, we reject Mr. Kimball’s justifications for
marketability discounts that derive from the buy-sell agreement
restrictions.
We also find that the restricted shares and pre-IPO studies
referenced by Mr. Kimball are not useful in determining
marketability discounts applicable to controlling interests,
because those studies analyzed marketability of noncontrolling
interests.
In the past, we have said that controlling shares in a
nonpublic corporation could suffer from a lack of marketability
because of the absence of a ready private placement market and
the costs of floating a public offering. See Estate of Andrews
v. Commissioner, 79 T.C. at 953. Therefore, we disagree with the
positions of Mr. Lax and respondent that marketability or
illiquidity discounts are never justified in the case of
controlling interests in private corporations.
Page: Previous 226 227 228 229 230 231 232 233 234 235 236 237 238 239 240 241 242 243 244 245 NextLast modified: May 25, 2011