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After calculating the above $25,784,000 entity value for
TPC, the estate’s experts calculated a prediscounted value for
the estate’s 20-percent interest in TPC as follows:
Value of TPC $25,784,000
Multiplied by Estate’s 20.57% Interest .2057
Prediscounted Value of Estate’s Interest$ 5,304,000
The estate’s experts then discounted the above $5,304,000 by
applying a 40-percent minority interest discount and an
additional 45-percent lack of marketability discount to arrive at
a date-of-death value of $1,750,000 for the 487,440 shares of TPC
common stock includable in decedent’s estate, as summarized
below:
Prediscounted Value of Estate’s 20.57% Interest$5,304,000
Less 40% Minority Interest Discount 2,122,000
Subtotal $3,182,000
Less 45% Lack of Marketability Discount 1,432,000
Value of Estate’s 20.57% TPC Stock Interest$1,750,000
The estate’s experts’ 40-percent minority interest discount
was based primarily on their reading of general valuation texts.9
The estate’s experts’ 45-percent lack of marketability
discount was based largely on the following factors: (1) The
stated intent of TPC’s management that it had no interest in
9 Coolidge, “Survey Shows Trend Toward Larger Minority
Discounts”, Estate Planning 282 (Sept. 1983); Coolidge, “Fixing
Value of Minority Interest in a Business; Actual Sales Suggest
Discount as High as 70%”, Estate Planning 141 (Spring 1975).
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