- 24 -
We note initially that, in this context, we prefer Dr.
Shapiro’s “private placement” approach (as embodied in the Bajaj
study) over Mr. Oliver’s more narrow “restricted stock” approach.
See McCord v. Commissioner, supra at 394. Absent further
explication of the Bajaj study by Dr. Shapiro, however, and
without the benefit of other empirical studies that would tend to
validate the conclusions of the Bajaj study, we are unpersuaded
that a 7.2-percent discount is an appropriate quantitative
starting point for determining the marketability discount
applicable to the gifted interests in this case.
Looking instead to the raw data from the Bajaj study, we see
that the average discount with respect to its sample of private
placements is 22.21 percent.23 The Hertzel & Smith study, cited
in the Bajaj study, reported an average discount of 20.14 percent
with respect to its sample of private placements.24 Averaging
those two figures, we conclude that a 21-percent marketability
discount is appropriate before adjustments to incorporate
characteristics specific to the partnership. We note that this
discount rate is very close to the 19.45-percent median discount
23 See Bajaj et al., supra at 107.
24 Hertzel & Smith, supra at 470. The other private
placement study cited in the Bajaj study, the Wruck study, does
not reveal an average discount for the overall sample.
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