PARTNERSHIP ADJUSTMENTS FOR LACK OF CONTROL AND MARKETABILITY
A case, Estate of James Barudin v. Comm., T.C. memo. 1996-395, has not only supported the level of adjustments presently being taken for lack of control and lack of marketability but also the extent to which Section 2704(b) may impact valuation. The case involved the valuation of a 1/95 interest in a general partnership which owned real property. Both sides agreed on the value of the underlying asset and the fact that a another party controlled the majority of the partnership. The only question was the extent of the adjustments. The Tax Court ruled that the estate was entitled to a 45 percent aggregate adjustment which roughly splits the difference between the IRS's 28 percent combined adjustment and the taxpayer's 67.5 percent. The Court noted that any general partner could dissolve the partnership but that right had little impact on the effective control of the partnership by the minority interest under consideration. This comment is noteworthy because some have argued that valuation discounts applied to limit ed partnerships can be decreased under Section 2704(b) when limited partners have the right to liquidate their interests by withdrawing from the partnership. If the right of a general partner to dissolve a partnership has no impact on valuation discounts, it is almost certain that the right of a limited partner to liquidate his partnership interest by withdrawing from the partnership should have no effect on discounts. The opinion is also helpful because it involves a general partnership interest, albeit a minority general partnership interest, which arguably would qualify for a lesser discount than a limited partner interest (unless the general partnership has a significant debt level which exposes all partners).
