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before considering discounts for lack of control and
marketability. R contends that the built-in capital
gain tax liability should be discounted (indexed) to
account for time value because it would be incurred in
the future rather than immediately. Under R’s approach
the reduction for built-in capital gain tax liability
would be approximately $21 million. The parties also
disagree about the discounts for lack of control and
marketability.
Held: The built-in capital gain tax liability
should be discounted to reflect when it is reasonably
expected to be incurred.
Held further: Amounts of discounts for lack of
control and marketability decided.
Sherwin P. Simmons and Veronica Vilarchao, for petitioner.
W. Robert Abramitis, for respondent.
MEMORANDUM FINDINGS OF FACT AND OPINION
GERBER, Chief Judge: Respondent determined a $2,564,772
deficiency in estate tax. After concessions,1 the issue for our
consideration concerns the fair market value of decedent’s
interest in a closely held corporation, and in particular, the
reduction, if any, for built-in long-term capital gain tax
liability, and discounts for lack of marketability and control.
1 The parties agree that the gross estate should be
increased by decedent’s right to receive a $116,784 income tax
refund for 1999 and decreased by net administrative expenses of
$23,680.
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