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Commissioner, T.C. Memo. 1975-333. A premium for control is
generally the percentage by which the amount paid for a controlling
block of shares exceeds the amount which would have otherwise been
paid for the shares if sold as minority interests. Id.
Although, generally, the minority discount is the inverse of
the control premium, Rakow v. Commissioner, T.C. Memo. 1999-177,
the control premium which is added to the majority block might be
less than the proper minority discount to be attributed to a
minority of the shares, Estate of Chenoweth v. Commissioner, supra
at 1589-1590.
Whether a premium for control, a discount for a minority
interest, or a discount for lack of marketability should be applied
in valuing nonpublicly traded closely held stock depends on the
valuation method employed in reaching the unadjusted value of the
stock.
The approach or approaches used in the valuation each
lead to a value with certain characteristics
(control/minority, marketable/nonmarketable, and so on).
* * * The characteristics of the value produced by the
approach dictate, to a large degree, the premiums and/or
discount(s) appropriate for the standard and premises of
value being sought.* * *
Pratt et al., Valuing A Business: The Analysis and Appraisal of
Closely Held Companies 303 (3d ed. 1996).
The market approach (comparable companies analysis) is based
on comparisons with publicly traded stocks and derives a value
based on publicly traded minority shares. Thus, the method
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