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Dr. Bajaj then applied a 35-percent discount to the value
derived under his discounted cashflow approach, which consisted
of a 25-percent marketability discount and an additional
10-percent discount to reflect the negative impact of Brown-
Forman’s right of first refusal and what Dr. Bajaj refers to as
“agency problems” (the inability of a purchaser of decedent’s
minority interest to influence dividend distributions, which
would be at the discretion of the controlling shareholder, Gary
Heck). Application of those discounts, totaling 35 percent,
resulted in Dr. Bajaj’s being of the opinion that the marketable
minority value of Korbel’s equity as of the valuation date was
$47,216,462, resulting in a value of $18,707,162 for decedent’s
630 shares, or $29,694 a share.
OPINION
I. Introduction
We must determine the fair market value of decedent’s 630
shares of Korbel on the valuation date. The shares were included
in decedent’s gross estate and reported on the estate tax return
at a value of $26,000 a share. Based upon the expert testimony
of Dr. Bajaj, petitioner now argues that the value of each share
on the valuation date was $29,694. We interpret petitioner’s
change in position as a concession that the estate is liable for
a portion of the deficiency, and we accept that concession. In
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