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average to below-average discount, while the long 20-year holding
period of CCC shares and the fact that there was no likelihood of
CCC’s going public favored a higher discount for CCC. On the
basis of an analysis of all these factors, Mr. Frazier applied a
35-percent discount rate for lack of marketability.
Mr. Shaked applied a 10-percent discount rate based on his
analysis of the factors described in Mandelbaum v. Commissioner,
supra. The nine factors used in the Mandelbaum case to analyze
the discount were: (1) Financial statement analysis, (2)
dividend policy, (3) outlook of the company, (4) management of
the company, (5) control factor in the shares to be purchased,
(6) company redemption policy, (7) restriction on transfer, (8)
holding period of the stock, and (9) costs of a public offering.
Mr. Shaked began his analysis with the assumption that 20
percent was an average discount and then applied the factors in
the Mandelbaum case to arrive at a 10-percent discount. Mr.
Shaked considered the fact that the securities held by CCC were
readily marketable in arriving at his discount. He believed that
CCC’s well-diversified portfolio resulted in low price volatility
and was a factor in applying a low discount for marketability.
In addition, since CCC’s assets were marketable securities, it
would be easier to find a willing buyer for this company than for
a riskier company whose performance was more speculative.
Respondent contends that Mr. Frazier’s assessment of
restrictions on transferability is misguided, arguing that an
expectation not to liquidate for another 20 years is different
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