Estate of Magnin v. Commissioner (U.S. Tax Court)

The decedent had owned 75,044 out of 255,174 shares outstanding of JM Co. common stock and 47.5 out of 1,000 shares outstanding of Specialty Shops Inc. common stock. The Court concurred with the valuator in his use of a lack of marketability discount and a minority interest discount on valuing the decedent’s positions in both JM Co. and Specialty, but determined that the valuator, in adding together the two discounts to get a combined discount percent of 60.00% was in error. The lack of marketability discount and the minority interest discounts are separate and distinct and in order to ensure accuracy, the minority interest discount is to be applied first, and then the lack of marketability discount then applied to that figure. This correction would have yielded an effective, albeit lower, rate of 51.25%.