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This does not end our analysis because JUL was owned by
Sealodge, and we must determine the value of petitioners’ 45-
percent interest.
Minority and Lack of Marketability Discounts
Minority discounts and discounts for lack of marketability
are often discussed together, but they are distinguishable.
Estate of Murphy v. Commissioner, T.C. Memo. 1990-472. Shares of
corporate stock which represent a minority interest may be worth
less than a proportionate share of the value of the assets of the
corporation. Id. (citing Harwood v. Commissioner, 82 T.C. 239,
267-268 (1984), affd. without published opinion 786 F.2d 1174
(9th Cir. 1986)); Estate of Andrews v. Commissioner, 79 T.C. 938,
957 (1982); Estate of Zaiger v. Commissioner, 64 T.C. 927,
945-946 (1975). In Estate of Andrews v. Commissioner, supra at
953, we noted the distinction between a minority discount and
lack of marketability discount:
The minority shareholder discount is designed to
reflect the decreased value of shares that do not
convey control of a closely held corporation. The lack
of marketability discount, on the other hand, is
designed to reflect the fact that there is no ready
market for shares in a closely held corporation.
Although there may be some overlap between these two
discounts in that lack of control may reduce
marketability, it should be borne in mind that even
controlling shares in a nonpublic corporation suffer
from lack of marketability because of the absence of a
ready private placement market and the fact that
flotation costs would have to be incurred if the
corporation were to publicly offer its stock. * * *
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