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Both Mr. Dankoff and Mr. Burns determine a minority interest
discount factor for each type of investment held by the
partnership, based (to the extent possible) on discounts observed
in shares of closed end funds holding similar assets.12 They
then determine their respective minority interest discounts for
the transferred interests by calculating the weighted average of
such factors, based on the partnership’s relative holdings of
each asset type. That is an approach we have previously followed
in the context of investment partnerships, see McCord v.
Commissioner, 120 T.C. 358, 376-387 (2003), and we shall do so
again here.
b. Partnership Asset Categories
Both Mr. Dankoff and Mr. Burns divide the assets of the
partnership into five basic categories: cash and money market
funds, U.S. Government bond funds, municipal bonds, domestic
equities, and foreign equities. We utilize those categories in
our analysis, except that we divide the “municipal bonds”
category into “national” and “Michigan” subcategories.
11(...continued)
roughly offset each other.
12 Although petitioner’s other expert, Mr. Stryker,
purports to derive his minority interest discount from discounts
observed in shares of closed end funds, his methodology is
comparatively both imprecise (his 5-percent discount is not
statistically derived from observed discounts) and incomplete (he
considers only domestic equity funds). For those reasons, we
give no weight to that portion of Mr. Stryker’s testimony.
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