- 285 -
c. Respondent’s Position
Respondent argues that no marketability discount is
appropriate for Dave True’s 34.235-percent interest in White
Stallion because it represented a significant ownership block
that had swing vote potential.
d. Court’s Analysis
We reject Mr. Kimball’s justifications for marketability
discounts that derive from the buy-sell agreement restrictions.
We also reject respondent’s swing vote argument for the
reasons stated in our analysis of True Oil, see supra pp. 201-
202, and Mr. Lax’s combined discount approach for reasons stated
supra p. 282.
We find that a minority interest in White Stallion, like a
minority interest in Belle Fourche, was less marketable than
actively traded interests because: (1) The two branches of the
True family are committed to keeping White Stallion privately
owned; (2) the subject interest lacks control; and (3) Federal
tax rules limit the pool of potential investors in S corporation.
Moreover, certain facts suggest that a minority interest in White
Stallion would be less marketable than a minority interest in
Belle Fourche. Although White Stallion was modestly profitable,
it was not a “cash cow” like Belle Fourche. Also, White Stallion
80(...continued)
nonmarketable minority value to be $160,860 due to a math error
that arose from Mr. Lax’s change in discount approaches between
the initial and final Lax reports.
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