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Frazier, discounted decedent’s CCC interest by 25 percent for
lack of control. Respondent’s expert, Mr. Shaked, applied a 5-
percent discount.
Mr. Frazier compared CCC to a closed-end and not widely
traded investment fund holding publicly traded securities. He
believed that CCC and a closed-end fund both have a fixed amount
of assets for trading, unlike open-end investment funds (mutual
funds). Because closed-end funds are flowthrough entities taxed
only at the shareholder level, Mr. Frazier concluded that the
discounts reflected in those funds did not include any reduction
for built-in capital gain tax liability. Likewise, because
closed-end funds are typically publicly traded, none of the
discount inherent in those funds would be attributable to lack of
marketability.
With those assumptions, Mr. Frazier reviewed 44 domestic
equity security funds and selected 15 that he believed were
comparable. He removed eight companies from the 15 because,
unlike CCC, they had guaranteed payouts. The remaining seven
companies had an average discount rate of 14.8 percent as of
March 4, 1999. The funds’ discounts and returns compared with
those of CCC, as computed by Mr. Frazier, are reflected in the
following table:
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