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An older concept but one which could fit beautifully into some of these options is the discount for lack of control or marketability, which could be carefully used to further enhance a transfer.
On their federal gift tax return, each reported the value of their 50% undivided interest at a 30% discount for lack of control and lack of marketability.
And, if less than 100 percent is being valued, a discount for lack of control may then be applied.
Of these, the most common valuation adjustments fall into two categories: (1) discount for lack of control and (2) discount for lack of marketability.
No discount for lack of control is necessary because cashflow capitalized or discounted is the amount available to the minority owner; therefore, the result is a minority value.
One view equates fair value with "fair market value" and factors in certain reductions in determining the value of a minority ownership interest (referred to as "discounts") that are common in a fair market value analysis, most notably, a discount for lack of control and a discount for lack of marketability.
The discount for lack of control derived from limited partnership data has a problem: It incorporates a marketability element [ILLUSTRATION FOR FIGURE 2 OMITTED].
The federal estate tax return reported the value of Jelke's interest in CCC as $4,588,155, which was computed by reducing CCC's net asset value by the entire built-in capital gains tax liability, as if the securities had been sold at the date of death, then applying a 20% discount for lack of control and a 35% discount for lack of marketability.