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respondent’s position during the administrative proceeding was
that the only reduction or discount from the fair market value of
the trust’s real property should be the cost to partition the
realty so that the partitioned interest of each decedent could be
converted into and sold as a full fee interest. Under that
partition approach, the fractional interest becomes a fee
interest and thereby not subject to any discount for
fractionalization, other than the cost to partition.
On March 18, 1999, John’s estate filed a second claim for a
refund based on an increase in the claimed discount from 50 to 60
percent. That discount resulted in a $504,610.37 value for
John’s 14/65 interest. Likewise, on May 11, 1999, Sarah’s estate
filed an amended return, claiming a refund on the basis of an
increased fractionalization discount from 50 to 60 percent. The
60-percent discount resulted in a reported value of $449,456.27
for Sarah’s 17/65 interest.
After the issuance of the notices of deficiency and the
filing of the estates’ petitions, the Appeals officer attempted
to arrange a settlement conference with the estates’
representative. Respondent points out that no settlement
conference was held because the estates’ representative “refused
to meet with the appeals officer in Houston unless the appeals
officer would agree to a minimum fractional interest discount of
45% for each estate.” Respondent also reports that “on the eve
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