- 8 -
interests (the gifted interest and the sold interest,4
respectively, and, collectively, the transferred interests) in
Peracchio Investors, L.P. (the partnership) transferred by
petitioner to the Peracchio Family Trust (the trust) in separate
transactions occurring on November 25, 1997 (the valuation date).
The parties agree that, because the partnership’s assets on the
valuation date consisted entirely of cash and marketable
securities, the partnership’s net asset value (NAV) on that date
is the appropriate starting point for determining the fair market
value of the transferred interests. The parties further agree
that, in valuing the transferred interests, it is appropriate to
discount each interest’s pro rata share of the partnership’s NAV
to reflect the lack of control and lack of marketability inherent
in the transferred interests. The parties disagree on the
magnitude of those discounts. For purposes of reporting the
value of the gifted interest on his Federal gift tax return and
establishing the consideration for the sold interest, petitioner
applied a combined discount of 40 percent. Respondent contends
that 4.4-percent and 15-percent discounts for lack of control and
lack of marketability, respectively, are appropriate, yielding a
combined discount (applying the separate discounts serially) of
18.74 percent.
4 We use the term “sold interest” solely for descriptive
convenience (i.e., without regard to the proper characterization,
for Federal gift tax purposes, of petitioner’s transfer of that
interest).
Page: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 Next
Last modified: May 25, 2011