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all of the stock of JPMS, which is not publicly traded. The
acquisition value based on that offer reflects the fact that there
is no ready market for shares in JPMS, a closely held corporation.
As we pointed out in Estate of Andrews v. Commissioner, 79 T.C. at
953, “even controlling shares in a nonpublic corporation suffer
from lack of marketability because of the absence of a ready
private placement market and the fact that flotation costs would
have to be incurred if the corporation were to publicly offer its
stock.” The $150 million acquisition value reflects a control,
nonmarketable value. Therefore, a discount for lack of
marketability of JPMS stock from the value determined by reference
to the offer to purchase the JPMS stock is not appropriate.
Because we used the real-world acquisition (control,
nonmarketable) value of $150 million for the entire company, we
were not convinced that the combined discounts opined by the
experts in their theoretical values are appropriate. Those
combined rates would apply an additional separate 30- to 40-percent
discount for lack of marketability to a value that reflects that
lack of marketability, in effect doubling the discount.
We recognize, however, that there may be some overlap between
discounts for a minority interest and for lack of marketability in
that lack of control may reduce marketability. Mr. Weiksner
applies a larger lack of marketability discount for minority
interests than for a controlling interest. In his report, he
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