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of realty and applied a 25-percent discount to account for the
decedent’s fractional interest.
On January 31, 1997, Sarah’s estate reported that her 17/65
interest in the trust had a $665,686 value. Sarah’s estate
relied on the same fair market value for the 16 parcels of
realty, but used a different appraiser for the discount. Based
on that appraiser’s report, a 50-percent fractionalization
discount was applied to Sarah’s 17/65 interest. On February 24,
1997, John’s estate filed an amended return claiming a refund on
the basis of the opinion used for Sarah’s estate tax return and
applying the 50-percent discount that had been used by Sarah’s
estate. The 50-percent discount resulted in a reported value of
$550,378 for John’s 14/65 interest.
Respondent’s valuation engineer, a forester, also valued the
parcels in the course of examining the estates’ tax returns.
Respondent, after considering appraisals relied on by the
estates’ and his own valuation engineer’s reports, issued a 30-
day letter, on June 26, 1998, containing respondent’s position,
as follows:
After a review of the appraisals provided by the
taxpayer the engineering group recommends the timber
volumes and unit prices [of the estate’s appraisal
reports] be accepted. A change to the discounts in
valuing the fractional interest is recommended as per
the attached report. The service’s approach is more
fully explained therein.
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Last modified: May 25, 2011