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payments remaining in decedent’s estate at death should receive a
marketability discount. In Shackleford v. United States, 262
F.3d 1028 (9th Cir. 2001), the taxpayer had won a State lottery
and died prior to receiving all the payments. The taxpayer was
precluded by State law from assigning those payments. The United
States argued that the annuity rules of section 2039 should
apply, and therefore the stream of payments should be valued
under the tables set forth in section 7520. The estate argued
that because of the lack of marketability of the payments, a lack
of marketability discount should be allowed. The Court of
Appeals for the Ninth Circuit upheld the District Court ruling
and explained: “We have long recognized that restrictions on
alienability reduce value.” Shackleford v. United States, supra
at 1032 (citing Bayley v. Commissioner, 624 F.2d 884, 885 (9th
Cir. 1980); Trust Servs. of Am., Inc. v. United States, 885 F.2d
561, 569 (9th Cir. 1989)), affg. 69 T.C. 234 (1977). The Court
of Appeals compared the situation with stock subject to resale
restrictions that prevented it from being sold freely in a public
market. Shackleford v. United States, supra at 1032.
The estate also cites a similar lottery case, Estate of
Gribauskas v. Commissioner, 342 F.3d 85 (2d Cir. 2003), revg. 116
T.C. 142 (2001), where this Court held on facts similar to
Shackleford that the taxpayer could not take the marketability
discount. The Court of Appeals for the Second Circuit reversed
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