Valuation Issues - Answer Key

1. C

Individuals with a "minority interest" typically have no management power, lack voting rights and have no say in the sale or liquidation of the business.

2.
A

In a typical FLP setup, the owners (parents) retain the general partnership interests and the children/grandchildren receive the limited partnership interests. The limited partners may qualify for the minority and lack of marketability discounts.

3.
B

A Blockage discount is only available for publically traded corporations. Mr. Stewart would not qualify for the minority discount either since he owns a controlling interest in the business by owning 80% of the company.

4.
A

Jeff will receive a step-up in basis to $30,000 on the ABC stock, and he will not owe any taxes on the inheritance of the stock. These assets will add $430,000 to the gross estate of Mr. Jones and Jeff will not owe any federal income tax on the life insurance proceeds. Introduction

You May Also Like

Related Articles
  1. Fundamental Analysis

    How to Create a Personal Risk Management ...

  2. Investing Basics

    Want to Beat the Market? Take on Some ...

  3. Trading Strategies

    Three Types Of Profit Protection Stops

  4. Professionals

    Worried About Stocks? Try on Convertibles

  5. Entrepreneurship

    Fed Raising Rates Affects Startup Funding

Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!