-86-
the discount rate to the amount actually paid for the stock after
the applicable valuation date.
Nor do we agree with the estate’s assertion on remand that
we should discount our redetermined value to take into account a
lack of marketability for the series A preferred stock. The
estate relies upon its expert, Herbert T. Spiro (Spiro), who
testified in Trompeter I that the freely traded value of the
decedent’s series A preferred stock should be adjusted for lack
of marketability. The estate’s reliance on this testimony is
misplaced. Spiro opined that the “freely traded value” of the
decedent’s shares should be discounted for lack of marketability,
and our methodology does not determine the freely traded value of
those shares. Where as here the value determined for shares of
stock is not the freely traded value of those shares, a lack of
marketability discount is inappropriate. As we noted in Estate
of Cloutier v. Commissioner, T.C. Memo. 1996-49, in rejecting a
similar assertion, a marketability discount generally represents
the additional price that an unlisted share would command if it
were freely traded. We held in Estate of Cloutier that a
marketability discount did not apply to the stipulated value of
the company in question because that value was not representative
of the company’s freely traded value. Id.
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