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in True Ranches would replicate the size adjustment employed to
determine the underlying value of True Ranches’ net assets.
First, Mr. Hall’s size adjustment under the cost approach was
required to account for substantial differences in size between
the comparable sales and the True Ranches properties being
analyzed. Second, marketability discounts measure the
probability of selling goods at specified terms based on the
demand for those goods and the existence of an established
market. See Estate of Jameson v. Commissioner, T.C. Memo. 1999-
43, 77 T.C.M. (CCH) 1383, 1397, 1999 T.C.M. (RIA) par. 99,043, at
269-99. Because the subject interests do not have the ability to
liquidate, we focus on the marketability of general partnership
interests in True Ranches. The fact that the underlying asset
values incorporate a size adjustment has no bearing on whether
there is demand for or an active market in True Ranches
partnership interests.
We find that a minority interest in True Ranches was not
fully marketable at the valuation dates because: (1) The True
family was committed to keeping True Ranches privately owned;
(2) there were risks that a purchaser would not obtain unanimous
consent to be admitted as a partner; and (3) a purchasing partner
would be exposed to joint and several liability.
A minority interest in True Ranches suffered from the same
marketability problems as an equivalent interest in True Oil.
Both companies incurred losses in the years being examined, and
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