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Among the larger holdings in this widely diversified portfolio of
marketable securities were Exxon, General Electric, Hewlett
Packard, Microsoft, and Pepsico.
On the estate’s Federal estate tax return filed on December
6, 1999, $4,588,155 was included in the gross estate as
representing the value of decedent’s 6.44-percent interest in CCC
(which decedent held through his revocable trust). The estate
computed the $4,588,155 value by reducing CCC’s $188,635,833 net
asset value by $51,626,884 for built-in capital gain tax
liability and then applying 20-percent and 35-percent additional
discounts to decedent’s stock interest for lack of control and
marketability, respectively.
In the notice of deficiency issued to the estate,
respondent, among other things, determined that the value of
decedent’s 6.44-percent interest in CCC was $9,111,111.
Respondent indicated that this $9,111,111 value included
“reasonable” discounts for lack of control and lack of
marketability.
OPINION
The primary question presented for our consideration
concerns the fair market value of an interest in a closely held
family corporation. Decedent held (through a trust) a 6.44-
percent minority interest in the corporation. The corporation in
this case is a holding company with a portfolio of widely traded
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