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considered studies of operating companies with a minimum
restriction on resale of at least 2 years. Although he
acknowledged that operating companies are inherently riskier than
holding companies, Mr. Frazier believed that the marketability
discount for CCC was comparable to those of operating companies
because CCC was not expected to liquidate for at least 20 years.15
He relied on Rev. Rul. 77-287, section 6.02, 1977-2 C.B. 319,
321-322, for the proposition that “the longer the buyer of the
shares must wait to liquidate the shares, the greater the
discount.”
Mr. Frazier believed that the studies he considered showed
that the following factors were relevant to a marketability
discount: Company revenues, company profitability, company
value, the size of the interest being valued, the company’s
dividend policy, whether the company is an operating or
investment company, and the likelihood the company will go
public. On the basis of CCC’s value, revenues, profitability,
and the size of the interest being valued, Mr. Frazier observed
that comparable discounts ranged anywhere from 14 percent to more
than 35 percent. Mr. Frazier believed that CCC’s dividend-paying
policy and the fact it was an investment company favored an
15 We must note that Mr. Frazier reduces CCC’s asset value
by the entire $51,626,884 built-in capital gain tax liability on
the assumption of a liquidation on the valuation date, whereas
for purposes of his lack of marketability analysis he relies on
the premise that CCC will not be liquidated for at least 20
years. In each instance, the approaches, although internally
inconsistent, produce the best results for his client (the
estate).
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