9th Circuit Quotes Professor Brant’s Rationale for a Partnership Interest Discount

Brant J. Hellwig (Assistant Professor, University of South Carolina School of Law) article entitled Revisiting Byrum, 23 Va. Tax Rev. 275, 278 (2003), was recently cited by the Ninth Circuit in the case of Estate of Bigelow v. C.I.R., No. 05-75957, slip op. at 10 (9th Cir. filed Sept. 14, 2007).

The court wrote that

One commentator has explained the rationale for the discount for lack of control and marketability:

Because the transferee of a partnership interest is guaranteed only to receive distributions that would have been made to the transferor, an unrelated third party would discount the value of the transferred interest on account of the inability to participate in decisions affecting management of the partnership affairs. Furthermore, due to the transferee’s inability to require the partnership interest to be redeemed and the absence of an established market on which an interest in a closely held partnership can be readily liquidated, the value of the transferred interest will be discounted to reflect its lack of marketability.

Special thanks to Wendy Gerzog (Professor of Law, University of Baltimore School of Law) for bringing this case to my attention.