Peter S. Peracchio - Page 26

                                       - 26 -                                         
          that the approximate average of those results provides a reliable           
          benchmark for the transferred interests.  Absent any analytical             
          support, we are unable to accept that premise, particularly in              
          light of the fundamental differences between an investment                  
          company holding easily valued assets (such as the partnership)              
          and the operating companies that are the subject of the                     
          restricted stock studies.                                                   
                    3.  Analysis of Respondent’s Expert                               
               Unfortunately, Mr. Burns does not offer a satisfactory                 
          alternative to the inadequate analyses of petitioner’s experts.             
          Following a brief analysis of six factors “that may influence the           
          size of the marketability discount”, he concludes in his written            
          report:                                                                     
               It is reasonable to assume that a negotiation between                  
               buyer and seller would initially focus on a discount                   
               for lack of marketability in the range of 5% to 25%.  A                
               discount above this range would not be justified for a                 
               conservatively-managed partnership holding highly                      
               liquid marketable securities and cash investments;                     
               while a discount below the range would ignore the costs                
               and effort that might be required to find a willing                    
               buyer.  I believe that a fair outcome of such a                        
               negotiation between buyer and seller would entail an                   
               adjustment of approximately 15% to reflect                             
               marketability concerns.                                                
               In his testimony at trial, Mr. Burns confirmed that the                
          lower limit of his suggested range of discounts (5 percent)                 
          represents the typical sales commission charged by brokers of               
          interests in private limited partnerships.  However, he also                
          testified that an additional discount (unspecified in degree)               





Page:  Previous  9  10  11  12  13  14  15  16  17  18  19  20  21  22  23  24  25  26  27  28  Next

Last modified: May 25, 2011