Yes, shares of an estate-owned business can absolutely trigger significant valuation discounts for tax purposes. This is one of the most powerful, yet misunderstood, strategies in estate planning for business owners.
The central conflict arises from a specific federal rule, Treasury Regulation § 20.2031-1(b), which defines “Fair Market Value.” This rule forces you to value assets based on what a hypothetical “willing buyer and willing seller”—two complete strangers—would agree to. This creates a direct clash with the reality of a family business, where the economic truth is that a small, non-controlling piece of the company is worth far less to an outsider than its simple pro-rata share. The immediate negative consequence of ignoring this is a massively inflated estate tax bill, which has forced countless families to sell the very business they built just to pay the taxes.
This isn’t a minor issue; valuation discounts for lack of control and lack of marketability can often reduce the taxable value of business interests by a combined 20% to 45% . For a business valued at $10 million, this could mean removing over $4 million from the taxable estate.
Here is what you will learn by reading this article:
- ✅ Understand the Two Key Discounts. You will learn the critical difference between a discount for lack of control (not being the boss) and a discount for lack of marketability (not being able to sell easily), and why they are not the same thing.
- ⚖️ Discover the Landmark IRS Rule. You will learn about Revenue Ruling 93-12, the specific IRS decision that officially opened the door for families to legally use these discounts, changing the face of estate planning forever .
- 📝 Learn How Your Own Documents Are Your Best Friend or Worst Enemy. You will see how the fine print in your company’s shareholder or operating agreement can either provide ironclad support for your discounts or completely undermine them in the eyes of the IRS.
- 👨👩👧👦 See Real-World Scenarios. You will walk through clear examples of how these discounts play out in common family situations, from proactive gifting that saves millions in taxes to unprepared estates that spark bitter family feuds.
- 🛡️ Build Your Defense Against an IRS Audit. You will get actionable knowledge on how to create a defensible valuation position, understand common IRS audit triggers, and know the steps to take to protect your family and your business from a challenge.
Deconstructing the Discounts: Control and Marketability Explained
To understand how these discounts work, you first need to break down what you actually own. A share of stock is more than just a piece of paper; it’s a bundle of rights. The value of that bundle changes dramatically depending on how many rights it contains.
This is where two separate and distinct concepts come into play: the Discount for Lack of Control (DLOC) and the Discount for Lack of Marketability (DLOM). They are often discussed together, but they address two completely different economic problems.
The Power Problem: Why Lack of Control Slashes Value (DLOC)
A Discount for Lack of Control, or DLOC, is a reduction in value because the owner of the shares does not have the power to direct the company’s most important decisions . Think of it like being a passenger in a car versus being the driver. The driver decides where to go, how fast to drive, and when to stop, while the passenger is just along for the ride.
In a business, a “controlling” owner—someone with more than 50% of the voting stock—holds all the valuable powers, often called the “prerogatives of control”. These powers are what give the stock its full value.
A controlling owner can:
- Hire and fire executives and set their salaries.
- Elect the entire board of directors.
- Decide if and when the company pays dividends to its owners.
- Force the sale or liquidation of the entire company.
- Change the company’s strategic direction.
A minority owner, on the other hand, has none of these powers. They cannot force the company to pay them a dividend to get a return on their investment. They cannot fire an incompetent CEO who is running the business into the ground. And most importantly, they cannot force a sale of the company to cash out their investment.
Because a minority interest lacks these critical rights, a hypothetical buyer would never pay a full, proportional price for it. The DLOC quantifies this reduction in value, which can often range from 5% to 40%, depending on the specific circumstances.
The Liquidity Problem: Why Being “Stuck” Slashes Value (DLOM)
A Discount for Lack of Marketability, or DLOM, is a completely separate reduction in value that reflects how difficult it is to sell an interest in a private, closely held business. This isn’t about power; it’s about access to cash. If you own shares of a public company like Apple, you can sell them in seconds and have cash in your bank account within days.
Selling shares in a private family business is the complete opposite. There is no public stock exchange for “Miller’s Hardware”. To sell your interest, you have to undertake a long, expensive, and uncertain process.
This process involves:
- Finding a Buyer: You have to actively search for someone willing to buy a non-controlling interest in a private company.
- Negotiating a Price: This involves complex back-and-forth negotiations, often requiring lawyers and accountants.
- Due Diligence: The buyer will want to inspect all the company’s financial records, contracts, and legal documents.
- Time and Risk: The entire process can take many months, or even years, during which the company’s value could decline.
The DLOM compensates a potential buyer for taking on all this time, cost, and risk. Because of this illiquidity, the value of the interest is lower. The evidence for DLOM is robust, with empirical studies showing that discounts for illiquid assets commonly range from 30% to 45%.
How the Two Discounts Work Together
It is critical to understand that DLOC and DLOM are separate and are applied sequentially. An appraiser doesn’t just add them together. They follow a clear, logical path known as the “levels of value” framework.
Here is a simple example. Let’s say a family business is valued at $10,000,000, and an estate owns a 20% interest.
- Start with the Pro-Rata Value: The simple math suggests the interest is worth $2,000,000 ($10,000,000 x 20%). This is considered the “controlling, marketable” value.
- Apply the DLOC First: The appraiser determines that a 15% DLOC is appropriate because the 20% stake has no control. The value is reduced by $300,000 ($2,000,000 x 15%), bringing the value down to $1,700,000. This is now the “non-controlling, marketable” value.
- Apply the DLOM Second: The appraiser then determines that a 25% DLOM is appropriate because the shares are illiquid. The discount is applied to the new, already-discounted value. The value is reduced by another $425,000 ($1,700,000 x 25%), bringing the final taxable value to $1,275,000.
In this case, the combined discounts resulted in a total value reduction of $725,000, or 36.25%, from the initial pro-rata value. This is not a tax loophole; it is a reflection of the true economic realities of owning that specific asset.
| Comparison | Discount for Lack of Control (DLOC) | Discount for Lack of Marketability (DLOM) | | :— | :— | | The Core Problem | Powerlessness. You can’t control the company’s decisions, like paying dividends or forcing a sale. | Trapped Investment. You can’t easily and quickly convert your ownership into cash. | | Economic Reason | Compensates a buyer for not having the valuable “prerogatives of control”. | Compensates a buyer for the time, cost, and uncertainty of selling a private asset. | | Key Influences | The size of your ownership block and the rights defined in your company’s legal documents. | Transfer restrictions in your company’s legal documents and the company’s financial health. | | How It’s Measured | Often derived from studies of “control premiums” paid in real-world acquisitions. | Derived from studies of “restricted stock” and “pre-IPO” sales that compare illiquid to liquid shares. |
The Rules of the Game: How the IRS and Courts View Discounts
Claiming these discounts isn’t a free-for-all. The entire practice is governed by a framework of IRS regulations, landmark rulings, and court cases. Understanding these rules is essential to building a defensible position.
The Bedrock Principle: The “Willing Buyer, Willing Seller” Standard
The entire foundation for valuation in U.S. tax law is the concept of “Fair Market Value” (FMV). The official definition, found in Treasury Regulation § 20.2031-1(b), is “the price at which the property would change hands between a willing buyer and a willing seller, neither being under any compulsion to buy or to sell and both having reasonable knowledge of relevant facts”.
This standard is powerful because it is hypothetical and objective. The valuation is not about what the shares are worth to you, your son, or your daughter. It is about what a neutral, unrelated third party in the open market would pay for that exact block of stock, with all its limitations.
This is the legal principle that forces the consideration of discounts. A hypothetical stranger would absolutely care that they have no control (DLOC) and no easy way to sell (DLOM), and they would demand a lower price because of it.
The Green Light from the IRS: Revenue Ruling 93-12
For years, the IRS fought against discounts in family businesses. Their argument was based on “family attribution,” meaning they believed that if a family collectively owned 100% of a business, no single family member’s interest should be considered a minority.
That all changed in 1993 with Revenue Ruling 93-12. In this groundbreaking decision, the IRS considered a case where a parent gifted 20% of their company to each of their five children. The IRS officially gave up its family attribution argument.
The ruling made it clear: the family relationship between the owners is irrelevant for valuation purposes. Each gift of a minority block of stock must be valued on its own, based on what a hypothetical stranger would pay for it. This ruling was a monumental victory for taxpayers and became the cornerstone of modern estate planning for family businesses.
The Pushback from Congress: The Anti-Abuse Rule of IRC Section 2704
While the IRS accepted the principle of discounts, Congress grew concerned that families were creating artificial restrictions in their company agreements for the sole purpose of manufacturing larger tax discounts. This led to the creation of a special anti-abuse rule: Internal Revenue Code (IRC) Section 2704.
Section 2704 essentially says that certain types of restrictions will be disregarded for valuation purposes if they are more restrictive than the default laws of the state where the business is located. For example, if a state’s default LLC law says a member can withdraw and get paid out, but your family’s LLC agreement says no one can ever withdraw, the IRS can ignore that restriction under Section 2704(b).
The consequence of this rule is that if your restrictions are deemed “applicable restrictions” under the code, your valuation discount could be significantly reduced or eliminated. This makes it critical that your company’s governing documents are drafted carefully and with a clear, legitimate business purpose beyond just tax savings.
The Battle in the Courts: Key Lessons from Landmark Cases
The rules from the IRS and Congress have been tested and clarified in the U.S. Tax Court. These court cases provide a real-world playbook on what works and what doesn’t.
One of the most important lessons comes from Estate of Murphy v. Commissioner. In this case, a woman gifted a tiny sliver of her stock just 18 days before her death to drop her ownership from a controlling 51% to a minority 49%. The court saw right through it, calling it a “testamentary device” created only for tax avoidance, and disallowed the discount. This case serves as a stark warning against “deathbed” planning that has no real non-tax purpose.
Another key case is Mandelbaum v. Commissioner. Here, the Tax Court didn’t just decide if a discount was allowed; it created a framework for deciding how big the discount should be. The court laid out a list of nine specific factors that appraisers should analyze to justify the size of a DLOM, including the company’s dividend policy, its financial health, and any restrictions on the stock. This case established that you can’t just pick an “average” discount; you must do a detailed, fact-specific analysis.
Finally, two cases from the New Jersey Supreme Court, decided on the same day, show how the purpose of a valuation changes everything.
- In Balsamides v. Protameen Chemicals, an “oppressed shareholder” was forced to buy out the “oppressing” shareholder. The court decided a marketability discount should apply. The reasoning was based on fairness: the buyer was acquiring an illiquid company, and it would be unfair to make him pay a full, undiscounted price to the very person whose bad actions caused the problem.
- In Lawson Mardon Wheaton v. Smith, “dissenting shareholders” were being bought out after a corporate restructuring. Here, the court decided a marketability discount should not apply. The reasoning was that the law was designed to protect minority owners from being squeezed out at a low price. Applying a discount would punish them for exercising their legal rights.
These cases demonstrate that while discounts are firmly rooted in tax law under the “Fair Market Value” standard, that logic can be completely reversed in shareholder disputes where the standard is “Fair Value” and the court’s goal is equity.
Real-World Scenarios: How Discounts Play Out in Families
The theory behind valuation discounts becomes much clearer when you see how it applies to real families and their businesses. Here are three of the most common scenarios that business owners face.
Scenario 1: The Proactive Planner
Sarah owns 100% of “Miller’s Hardware,” a successful business valued at $10 million. She is 60 years old and wants to transfer the business to her two children, David and Emily, while minimizing taxes. Her estate planning attorney advises her to start a lifetime gifting program.
Over the next five years, Sarah gifts 10% of the non-voting stock in Miller’s Hardware to each of her children annually. Each 10% gift is valued separately by a qualified appraiser. Because each gift is a non-controlling, illiquid interest, the appraiser applies a 15% DLOC and a 25% DLOM.
| Planning Move | Tax Outcome |
| Sarah gifts a 10% interest with a pro-rata value of $1,000,000. | The appraiser applies a 36.25% combined discount, valuing the gift at only $637,500 for tax purposes. |
| Over five years, Sarah transfers 100% of the company to her children. | She uses her lifetime gift tax exemption based on the discounted value of the shares, allowing her to transfer the entire $10 million company while potentially using only about $6.4 million of her exemption. |
| The business continues to grow in value after the gifts are made. | All of that future growth occurs outside of Sarah’s taxable estate, saving even more in future estate taxes. |
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By planning ahead, Sarah successfully transferred the entire business to the next generation at a significantly reduced tax cost, preserving family wealth.
Scenario 2: The Unprepared Estate
Now, consider a different situation. Frank also owns 100% of a $10 million business, “Frank’s Manufacturing.” He is also 60, but he never gets around to estate planning. He believes his will, which leaves everything equally to his three children, is all he needs.
Frank suddenly passes away at age 70. At the time of his death, he still owns 100% of the company.
| Situation at Death | Estate Tax Consequence |
| Frank dies owning a 100% controlling interest in the business. | The entire $10,000,000 value of the business is included in his taxable estate. No minority discount (DLOC) is applicable because he owned a controlling interest. |
| The will directs the executor to divide the shares equally among his three children. | This division happens after the estate valuation. The fact that the children will receive minority interests is irrelevant for calculating the tax on Frank’s estate. |
| The estate owes federal estate tax on the full $10 million value. | The family may be forced to sell the business or take on significant debt to pay the estate tax bill, which could be millions of dollars. |
Because Frank failed to plan, his family lost the opportunity to use valuation discounts. The tax burden now threatens the very survival of the business he built.
Scenario 3: The Family Feud
Brenda and Tom inherit their father’s construction company. Brenda, who worked in the business for 20 years, inherits 60% of the shares and becomes the new CEO. Tom, a doctor who lives in another state and was never involved, inherits 40%.
A year later, Tom decides he wants to cash out. He knows the business was valued at $5 million for their father’s estate, so he expects to receive $2 million for his 40% share. He is shocked when Brenda’s lawyer offers him only $1.2 million.
| Heir’s Expectation | Valuation Reality |
| Tom believes his 40% share is worth a simple pro-rata value of $2,000,000. | A qualified appraiser determines that Tom’s 40% interest is a non-controlling, non-marketable block of stock. |
| Tom feels his family is trying to cheat him out of his rightful inheritance. | The appraiser applies a 40% combined discount for lack of control and lack of marketability, valuing Tom’s interest at $1,200,000. This is the price a hypothetical outside buyer would pay. |
| The disagreement leads to a breakdown in the family relationship and costly litigation. | The conflict could have been avoided with a well-drafted buy-sell agreement that clearly defined the valuation method for a buyout, managing both Tom’s and Brenda’s expectations from the start. |
This scenario highlights the emotional side of discounts. Without proper education and communication, family members who are not active in the business can feel that discounts are an unfair trick to reduce their inheritance, leading to resentment and disputes .
Building a Bulletproof Valuation: The Science and the Strategy
A valuation discount is only as strong as the evidence supporting it. Simply claiming a 35% discount on a tax return without rigorous support is a direct invitation for an IRS audit. A defensible position is built on professional standards, empirical data, and smart legal planning.
The Role of the Qualified Appraiser
The cornerstone of any defensible discount is a comprehensive appraisal report prepared by a “qualified appraiser”. This is not a job for your company’s internal accountant or a family friend. A qualified appraiser is an independent professional with specialized credentials, such as those from the American Society of Appraisers (ASA) or the American Institute of Certified Public Accountants (AICPA).
These professionals are bound by strict standards, such as the AICPA’s Statement on Standards for Valuation Services (SSVS No. 1) or the ASA’s Business Valuation Standards. These standards require the appraiser to be objective and to follow a detailed, replicable process. A report that states its compliance with these standards is immediately more credible to the IRS and the courts.
The Science: How Discounts Are Actually Calculated
Qualified appraisers don’t just guess at a discount percentage. They use objective, empirical data from real-world market transactions to support their conclusions.
For the DLOM, the two most common sources of data are:
- Restricted Stock Studies: These studies analyze sales of “restricted stock” in publicly traded companies. This stock is identical to the company’s regular stock, but it comes with a legal restriction that prevents it from being sold on the open market for a period of time (e.g., six months). By comparing the sale price of the restricted stock to the price of the freely traded stock on the same day, appraisers can measure the discount the market demands for illiquidity. The IRS has explicitly endorsed this method in Revenue Ruling 77-287.
- Pre-IPO Studies: These studies look at a company’s private stock sales in the period leading up to its Initial Public Offering (IPO). They compare the price of the private shares to the IPO price. The difference is considered a measure of the discount for lack of marketability.
A crucial point is that a good appraiser never just applies the “average” discount from a study. They perform a detailed comparative analysis, finding transactions in the database from companies that are most similar to the subject company in terms of size, industry, and financial health. They then adjust that benchmark discount based on the specific facts of the case, using frameworks like the Mandelbaum factors.
The Legal Foundation: The Power of Your Corporate Agreements
The best appraisal in the world can be undermined by poorly drafted corporate documents. Your company’s shareholder agreement, partnership agreement, or LLC operating agreement provides the legal reality of what an owner can and cannot do. These documents can either be your strongest evidence or your biggest liability.
Provisions that SUPPORT discounts:
- Strict Transfer Restrictions: Clauses that require the consent of other owners before a sale or give the company a “right of first refusal” are powerful evidence for a high DLOM.
- Clear Lack of Control: Language that explicitly states a minority owner cannot compel dividends or force a liquidation provides direct support for a DLOC.
- No Guaranteed Exit: The absence of a “put right” that would force the company to buy back shares reinforces the illiquidity of the interest.
Provisions that NEGATE discounts:
- Mandatory Buyout at a Fixed Price: If your agreement guarantees that the company will buy back shares at a specific, non-discounted price, you have contractually created a market, which can eliminate the DLOM.
- Enhanced Minority Rights: If your agreement gives minority owners special voting rights on major decisions (like a sale), it weakens the argument for a large DLOC.
- Ignoring the Agreement: If your family has a history of ignoring the rules in your own agreement, the IRS can argue it’s not a real business arrangement and should be disregarded entirely.
This shows that effective discount planning starts years before an appraisal is needed. It is built into the legal DNA of your business.
Mistakes to Avoid When Claiming Valuation Discounts
The path to successfully claiming valuation discounts is filled with potential pitfalls. Making one of these common mistakes can lead to a costly IRS audit, litigation, and the complete disallowance of your intended tax savings.
- Mistake 1: Using a “Rule of Thumb” Discount. Many business owners believe there is a standard, off-the-shelf discount they can apply.
- Negative Outcome: The IRS and the Tax Court will almost certainly reject a discount that is not supported by a detailed, fact-specific analysis from a qualified appraiser. A credible report must connect the chosen discount percentage directly to the characteristics of your business and to empirical data.
- Mistake 2: Last-Minute “Deathbed” Planning. Transferring shares just days or weeks before death with the obvious sole purpose of creating a minority interest.
- Negative Outcome: The IRS will invoke the “substance over form” doctrine, as seen in the Estate of Murphy case. The court will likely disregard the transfer as a tax-avoidance scheme and value the shares as a controlling block, completely eliminating the discount.
- Mistake 3: Disregarding Corporate Formalities. Treating the business like a personal piggy bank, co-mingling personal and business funds, and failing to hold meetings or keep corporate minutes.
- Negative Outcome: This gives the IRS a powerful argument to “pierce the corporate veil” and treat the entity as a sham. If the entity is disregarded, any restrictions in its agreements are also disregarded, and the discounts disappear.
- Mistake 4: Having a Contradictory Buy-Sell Agreement. The agreement requires the company to buy back shares from an estate at a price based on the full, pro-rata value of the enterprise.
- Negative Outcome: The buy-sell agreement has contractually created a market and a price for the shares. The IRS will argue that the value for tax purposes cannot be lower than the price the estate is legally entitled to receive under the agreement, thereby negating the discount.
- Mistake 5: Inadequate Disclosure on the Tax Return. Failing to properly describe the transfer and the valuation methodology on the Form 709 (Gift Tax Return).
- Negative Outcome: The statute of limitations for an IRS audit (typically three years) never starts to run. This means the IRS can come back and challenge the valuation five, ten, or even twenty years later, when records are lost and memories have faded, making a defense nearly impossible.
Strategic Decisions: Do’s, Don’ts, Pros, and Cons
Successfully using valuation discounts involves more than just technical compliance; it requires strategic decision-making. You must weigh the tax benefits against potential income tax consequences and navigate the complexities of family dynamics.
Do’s and Don’ts for a Defensible Discount Strategy
| Do’s | Don’ts |
| DO get a comprehensive appraisal from a qualified, independent appraiser for every transfer. This is your single most important piece of evidence. | DON’T rely on an informal estimate, a “rule of thumb,” or an appraisal from someone who is not independent. |
| DO start your planning and gifting early. A consistent pattern of transfers over many years looks much better than a single, large transfer right before a major life event. | DON’T engage in “deathbed” planning. Transfers made shortly before death are a major red flag for the IRS. |
| DO operate your business like a real business. Hold regular meetings, keep minutes, and maintain separate bank accounts. | DON’T co-mingle personal and business assets or use the company account to pay personal bills. |
| DO ensure your entity has a legitimate, non-tax business purpose, such as liability protection or centralized management. | DON’T create a Family Limited Partnership that holds only marketable securities, as the IRS may see it as a device created solely to manufacture discounts. |
| DO review your buy-sell and operating agreements to ensure they align with your discount strategy and don’t contain contradictory valuation clauses. | DON’T assume your old documents are sufficient. An outdated agreement can unintentionally sabotage your entire plan. |
The Big Trade-Off: Gifting Now vs. Inheriting Later
One of the most critical strategic decisions a business owner must make is whether to gift business interests during their lifetime or transfer them at death. This choice involves a significant trade-off between estate tax savings and income tax consequences.
The key concepts are the lifetime gift tax exemption and the “step-up” in basis at death. Gifting uses up your exemption, while inheriting provides a potentially massive income tax benefit.
| Aspect | Gifting Shares During Life | Inheriting Shares at Death |
| Pros | ✅ You can lock in valuation discounts (DLOC & DLOM) on each minority interest gift, transferring more wealth tax-efficiently. ✅ All future growth and appreciation of the gifted shares are removed from your taxable estate. | ✅ Heirs receive a “step-up” in basis to the fair market value at the date of death under IRC § 1014. This can wipe out decades of built-in capital gains. ✅ It is simpler and requires less active planning during your lifetime. |
| Cons | ❌ Your heirs receive the shares with your original, often very low, cost basis. If they later sell the business, they could face a very large capital gains tax bill. ❌ The gifts are irrevocable. Once you give the shares away, you cannot get them back. | ❌ You lose the opportunity to use minority interest discounts if you die owning a controlling interest. The entire controlling block is valued in your estate without a DLOC. ❌ The entire value of the business, including all its appreciation, remains in your taxable estate. |
The right choice depends on a complex analysis. If your estate is well above the tax exemption and your heirs are likely to keep the business for the long term, the estate tax savings from lifetime gifting often outweigh the future capital gains cost. If your estate is smaller and the business is likely to be sold soon after your death, preserving the step-up in basis might be more valuable.
Frequently Asked Questions (FAQs)
1. Are minority discounts legal for estate tax? Yes. The IRS officially recognized the legality of minority discounts for family businesses in Revenue Ruling 93-12. The key is that the valuation must be properly supported by a qualified appraisal.
2. What is a typical combined discount percentage? No, there is no “typical” number. However, combined discounts for lack of control and marketability often fall in the 20% to 45% range. Anything higher requires exceptionally strong justification to withstand IRS scrutiny.
3. Can I take a discount if all the other owners are my family? Yes. This is the core principle of Revenue Ruling 93-12. The valuation is based on a hypothetical, unrelated buyer, so family relationships are ignored for the purpose of determining control and applying discounts.
4. Does a 50% ownership stake get a discount? Yes, often it can. In many states, a 50% owner cannot unilaterally control the company and can be deadlocked by the other 50% owner. This lack of absolute control can justify a discount for lack of control.
5. How does a buy-sell agreement affect these discounts? It has a huge impact. A restrictive agreement can support a marketability discount. However, an agreement that forces a buyout at a set, non-discounted price can completely eliminate the discount for tax purposes.
6. Will claiming a large discount guarantee an IRS audit? No, but it significantly increases the probability. Large discounts, especially on estates near the exemption amount, are a known audit trigger for the IRS. A robust appraisal is your best defense.
7. What is the biggest mistake people make? The most common mistake is failing to get a comprehensive appraisal from a qualified, independent expert. Relying on a “rule of thumb” or an informal estimate is the fastest way to have your discount disallowed by the IRS.
8. What is the “swing vote” argument? The IRS sometimes argues that a minority block should not be discounted if it could team up with another block to form a majority. Courts have generally rejected this, sticking to the hypothetical buyer standard.
9. Is it better to gift shares now or let my heirs inherit them? It’s a trade-off. Gifting now allows you to use discounts to save on estate tax, but heirs get a low tax basis. Inheriting gives heirs a “step-up” in basis, saving on capital gains, but you lose the discount opportunity.
10. What are the Mandelbaum factors? They are a list of nine factors the Tax Court outlined in Mandelbaum v. Commissioner that an appraiser should consider to determine the appropriate size of a marketability discount, such as dividend policy and transfer restrictions.