Clarissa W. Lappo - Page 10

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          C.  Minority Interest Discount                                              
               In estimating the fair market value of a noncontrolling                
          interest in a closely held business entity, it may be appropriate           
          to decrease NAV to reflect lack of control inherent in the                  
          interest.  See, e.g., Estate of Andrews v. Commissioner, 79 T.C.            
          938, 953 (1982).                                                            
               1.  Marketable Securities                                              
               As previously indicated, with respect to the marketable                
          securities component of the partnership interests, petitioner’s             
          expert recommends a 7.5-percent minority interest discount,                 
          whereas respondent’s expert recommends an 8.5-percent minority              
          interest discount.  The parties agree that the difference is not            
          significant.  At trial, petitioner agreed to use respondent’s               
          slightly higher net asset values for the marketable securities.             
          Out of fairness to petitioner, we also use Dr. Shapiro’s slightly           
          higher 8.5-percent minority interest discount rate.                         
               2.  Real Estate                                                        
                    a.  Selection of Guideline Companies                              
               Both experts agree that publicly traded real estate                    
          investment trusts (REITs) provide an appropriate starting point             
          for determining the minority interest discount with regard to the           
          partnership’s real estate holdings.  They disagree, however, on             
          which REITs should be used for comparison and on the analysis of            
          the REITs data.                                                             






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