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American, and Salomon Brothers had investment strategies similar
to CCC’s. CCC’s focus was long-term capital growth and it did
not have a guaranteed dividend payout. However, the amount of
discount in these comparable funds that is due to lack of
control, rather than some other factor, is speculative. We also
note that while CCC performed well, it did not perform as well as
some of the comparables. In addition, CCC was relatively small
compared to the comparable investment funds. CCC had a $167
million value compared to billions of dollars in many of the
comparables.
On the other hand, CCC was well diversified, reducing the
investment risk. In addition, investors in CCC would be less
inclined to desire control because of the passive nature of an
investment in this kind of company and its established long-term
performance of good returns. Considering all of these factors,
we hold that a 10-percent lack-of-control discount is
appropriate.
2. Discount for Lack of Marketability
A discount for lack of marketability addresses liquidity or
the ability to convert an asset into cash. See, e.g.,
Mandelbaum v. Commissioner, T.C. Memo. 1995-255, affd. 91 F.3d
124 (3d Cir. 1996). When valuing stock, we assume that the buyer
and seller each have “reasonable knowledge of the relevant
facts.” Sec. 20.2031-1(b), Estate Tax Regs.
Mr. Frazier used a 35-percent and Mr. Shaked used a 10-
percent discount for lack of marketability. Mr. Frazier
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