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estate was the $20.8125 valuation date trading price for publicly
traded Reliance shares discounted by 20.72 percent to reflect
lack of marketability and liquidity relating to the resale
restrictions applicable to the estate’s Reliance shares and to
the size of the block of the estate’s Reliance shares in relation
to the volume of publicly traded shares of Reliance stock.5
On audit, respondent determined that the estate’s Reliance
shares should be discounted from the valuation date trading price
but by only 8 percent. The notice of deficiency and the record
herein do not reflect how respondent calculated this
8-percent discount.
For trial, both the estate and respondent retained new
valuation experts. On December 18, 2005, Ken Nunes (Nunes),
respondent’s new valuation expert, finalized a report in which he
concluded that the estate’s Reliance shares should be included in
decedent’s gross estate at the valuation date trading price
discounted by 9 percent.
5 Gregory Range (Range) discounted the estate’s Reliance
shares by 20 percent from the $20.625 valuation date closing
trading price instead of from the $20.8125 valuation date average
trading price as required in sec. 20.2031-2(b)(1), Estate Tax
Regs. In a letter to the estate’s attorney attached to his
valuation report, Range states: “If the IRS wants to express the
fair market value in terms of the discount from the mean of the
high and the low prices as of the valuation date, then the
discount would be 20.72%.” For convenience and uniformity with
the other experts, we use for Range’s discount 20.72 percent.
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