- 28 -
reasonable.13 In addition, the turnover rate of securities used
by Mr. Shaked is conservative and reasonable under the
circumstances. The asset turnover rate reasonably predicts the
period over which the company’s assets will be disposed of and
thus built-in capital gain tax liability would likely be
incurred. Consequently, we find it appropriate to use a 16-year
period of recognition for the tax liability attributable to the
built-in capital gain. We therefore accept Mr. Shaked’s
computation arriving at a $3,226,680.25 annual tax liability and
a discounted total liability of $21,082,226.
We accordingly hold that the undiscounted value of CCC on
the date of decedent’s death was $167,553,607 ($188,635,833 -
$21,082,226). This holding results in an 11.2-percent reduction
in value for built-in capital gain tax liability ($21,082,226
divided by $188,635,833 equals 11.2 percent).
C. Discounts To Be Applied
1. Discount for Lack of Control
Decedent’s 6.44-percent (minority) interest in CCC must be
discounted for lack of control. The estate’s expert, Mr.
13 We recognize that a discount rate would normally be a
matter of negotiation between a willing buyer and seller. The
estate, in its posttrial briefs, agrees that Mr. Shaked’s
discount rate is an appropriate rate if we were to discount the
built-in capital gain tax liability. Because the estate agrees
with this rate and the parties have provided no further evidence
with regard to a discount rate, we give no further consideration
to this matter.
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