- 23 -
Commissioner, 6 T.C. 1188, 1192 (1946); Kirsch v. Commissioner,
T.C. Memo. 1985-114, affd. without published opinion 786 F.2d
1170 (8th Cir. 1986); Hawkinson v. Commissioner, T.C. Memo. 1972-
32; McIntosh v. Commissioner, T.C. Memo. 1967-230. Petitioners,
however, do not contend that the discounted value of the
collection is erroneous. Instead, petitioners contend that the
discount determined by the Panel was attributable to the
collection as a whole and does not apply in determining the value
of each work of art that sold separately. Thus, petitioners
argue that the “appraised value” contemplated by section 1.1014-
3(a), Income Tax Regs., is the undiscounted fair market value
determined by the Panel for each work of art in the collection.
A blockage discount was applied in determining the value of
the collection because of the collection’s size and nature. In
determining the blockage discount, the Panel took into account,
inter alia, the possibility that the market might be flooded if
the individual works of art were put up for sale at the same time
or, alternatively, the possibility that the collection would be
disposed of over time in order to realize each work’s full value.
See, e.g., Calder v. Commissioner, 85 T.C. 713, 721-726 (1985);
Estate of Smith v. Commissioner, 57 T.C. 650, 658-659 (1972),
affd. 510 F.2d 479 (2d Cir. 1975). Because the substantive
effect of the blockage discount was to establish a proportionate
value for each work of art in the collection that reflected these
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