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Holman v. Comm'r of Internal Rev., No. 08-3774

Holman v. Comm'r of Internal Rev., No. 08-3774, concerned a petition for review of the tax court's order (1) holding that the IRS correctly applied I.R.C. section 2703 and properly disregarded petitioners' partnership agreement's transfer restrictions and (2) applying smaller lack-of-marketability and minority-interest discounts than those claimed by petitioners.  The court of appeals denied the petition, holding that 1) the tax court correctly held the present restrictions on the sale of the shares at issue were not "a bona fide business arrangement" in accordance with section 2703(b)(1); and 2) the tax court's approach in adopting an expert's analysis comported with the general rule of casting the potential buyer merely as a rational economic actor.

As the court wrote:  "Thomas H. Holman, Jr. and Kim D.L. Holman (the "donors") created a limited partnership, funded it with common stock of Dell, Inc., and gifted limited partnership shares to their children. In a gift-tax return, the donors asserted lack-of-marketability and minority-interest discounts to claim a value for the gifts substantially below the value of the underlying Dell stock. In doing so, the donors relied in part on transfer restrictions contained in the partnership agreement, asserting that the transfer restrictions would depress the value of the partnership shares relative to the value of the underlying assets."

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