- 239 -
the restricted shares studies, and reduced it to 30 percent to
eliminate the effects on value of the buy-sell agreement
restrictions.
We find that a minority interest in Belle Fourche, like a
minority interest in True Oil, is less marketable than actively
traded interests because: (1) The True family is committed to
keeping Belle Fourche privately owned, (2) the subject interest
lacks control, and (3) Federal tax rules limit the pool of
potential investors in S corporations. However, certain facts
suggest that a minority interest in Belle Fourche would be more
marketable than an equivalent interest in True Oil. First, Belle
Fourche historically has been profitable, unlike True Oil.
Second, on average Belle Fourche’s distributions substantially
exceeded the shareholders’ tax obligations on their distributive
shares of income, while True Oil’s net distributions were not
significant. Third, a purchaser of Belle Fourche stock would not
be subject to joint and several liability.
Based on the foregoing, we conclude that a minority interest
in Belle Fourche is more marketable than the same percentage
interest in True Oil. Therefore, to remain within the 26 to 45-
percent range of discounts observed in the restricted shares
studies, we assign a 27-percent marketability discount to Jean
True’s 17.23-percent interest in Belle Fourche transferred as of
June 30, 1994.
Page: Previous 229 230 231 232 233 234 235 236 237 238 239 240 241 242 243 244 245 246 247 248 NextLast modified: May 25, 2011