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B. Fair Market Value Before Discounts
As determined supra, the NAV method is generally an
appropriate method to apply when computing the value of a
nonoperating entity. See Estate of Ford v. Commissioner, supra.
While more than one method may be used, giving appropriate weight
as necessary, we find that in this case, where the interest to be
valued is an interest in a family limited partnership whose
assets consist solely of cash and certificates of deposit, the
income approach should not be afforded more than minor weight.
The parties agree that the value of KLLP’s assets on the
valuation date, decedent’s date of death, was $1,226,421,
consisting of $807,271 cash and $419,150 in certificates of
deposit and no liabilities. Therefore, we use this as the NAV.
C. Minority Interest (Lack of Control) Discount
1. Introduction
Pursuant to the partnership agreement, a buyer of all or any
portion of the transferred interests would have limited control
of his investment. A hypothetical willing buyer would account
for this lack of control by demanding a reduced price; i.e., a
price that is below the NAV of the pro rata share of the interest
purchased in KLLP. A minority discount will therefore apply in
this case where a partner lacks control. See Estate of Bischoff
v. Commissioner, 69 T.C. 32, 49 (1977).
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