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agree that a lack of marketability discount should be applied to
the partnership’s NAV (after applying the minority interest
discount), they disagree on the magnitude of that discount. See
Peracchio v. Commissioner, T.C. Memo. 2003-280; see also Estate
of Bailey v. Commissioner, T.C. Memo. 2002-152 (indicating that
the application of a minority discount and a discount for lack of
marketability is multiplicative rather than additive).
2. Determination of the Marketability Discount
There are several ways to determine a marketability
discount. Two of the most common include the initial public
offering (IPO) approach and the restricted stock approach.
McCord v. Commissioner, supra at 387. IPO studies compare the
private-market price of shares sold before a company goes public
with the public-market prices obtained in the IPO of the shares
or shortly thereafter. See id. Restricted stock studies compare
private-market prices of unregistered (restricted) shares in
public companies with the public-market prices of unrestricted
but otherwise identical shares in the same corporations. See id.
A variant of the restricted stock approach, the private placement
approach, attempts to isolate the effect that impaired
marketability has on the discount determined under the restricted
stock approach. See id. at 388, 392.
This Court has concluded that the private placement approach
is appropriate where the interest to be valued was part of an
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