Gift, Estate, & Income Tax Compliance

April 1, 2020

Mercer Capital’s Value Matters® 2020-04

The 1991 Silber Study of Restricted Stock Discounts

We Should Have Known Then

Excerpted from www.ChrisMercer.net Blog

By the time I came into the business valuation profession, appraisers recited a small number of restricted stock studies to conclude that typical discounts were in the range of 25% to 45%, and therefore, that marketability discounts for illiquid minority interests of private companies should be in that range, as well.

But Professor William L. Silber wrote an article in the respected Financial Analysts Journal that told a different story.1  However, business appraisers ignored wisdom found in the Silber Study and only took its conclusion that the average discount in the study was 34% as confirming of the existing lore.

Summary statistics from the Silber Study are provided in Exhibit 8.4 of our forthcoming book, Business Valuation: An Integrated Theory, Third Edition (Mercer & Harms, Wiley 2020), which is available for purchase on Amazon.com. Exhibit 8.4 is reproduced on page 3 of this newsletter.

But wait, there’s more.  Professor Silber looked at his sample of 69 restricted stock discounts and noticed a distinct difference between the companies that had lower discounts (less than 35%) and higher discounts (greater than 35%).  The study provided additional color as found in Exhibit 8.5 (on page 3 of this newsletter).

What a difference a more informed look makes.  The average for transactions with discounts exceeding 35% was 54%, while the average for transactions with discounts less than 35% was 14%.  What could have caused this difference?  Professor Silber provided summary statistics for the two subgroups.  Simply put, the companies with lower discounts were just more attractive in terms of cash flow, perceived risk, and likely expected growth than the companies with higher discounts.  They were larger in terms of revenue and market capitalization and more profitable than the companies in the larger discount sample.

A picture is helpful.  I wrote about the Silber Study in Quantifying Marketability Discounts (which introduced the QMDM) in 1997 and provided a chart similar to Exhibit 8.6 from the new book (on page 3 of this newsletter).

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October 2026 | When a Large Ownership Block Doesn’t Mean Control
Value Matters® October 2026

When a Large Ownership Block Doesn’t Mean Control | Valuation Lessons from Grieve v. Commissioner

A large ownership interest does not necessarily convey control, a distinction with important implications for gift and estate tax valuations. In Grieve v. Commissioner, T.C. Memo. 2020-28, the U.S. Tax Court accepted discounts for lack of control and lack of marketability on ownership interests representing 99.8% of the economic interests in two family-owned LLCs.
Thomas C. Insalaco to Speak at Tampa Bay Estate Planning Council
Thomas C. Insalaco to Speak at Tampa Bay Estate Planning Council
Thomas C. Insalaco, CFA, ASA, Senior Vice President at Mercer Capital, will speak at the Tampa Bay Estate Planning Council on Wednesday, October 21, 2026, at the Chester H. Ferguson Law Center in Tampa, Florida.His presentation, “Navigating Business Valuations: What Estate Planners Need to Know,” will examine common estate planning valuation issues that have recently received IRS scrutiny and offer practical guidance for avoiding potential problems.The Tampa Bay Estate Planning Council brings together attorneys, fiduciaries, accountants, investment advisors, charitable giving specialists, family office executives, insurance professionals, and valuation experts. The Council promotes collaboration among the disciplines involved in estate planning and provides educational opportunities for its members. As a Council Partner, Mercer Capital is proud to support the organization’s educational programming and commitment to collaborative planning.Tom Insalaco is a Senior Vice President and a member of Mercer Capital’s Gift, Estate, and Income Tax Planning and Compliance practice group. Since 2008, he has provided valuation services across a broad range of industries and matters, including gift and estate tax, business succession and exit planning, and buy-sell agreements.Mercer Capital regularly works with attorneys, fiduciaries, business owners, and other professional advisors on valuation matters involving gift and estate tax planning, business succession, ownership transitions, and buy-sell agreements.For additional information or to register, visit the Tampa Bay Estate Planning Council’s website.
Mercer Capital to Sponsor ACTEC’s 2026 Fall Meeting
Mercer Capital to Sponsor ACTEC’s 2026 Fall Meeting
Mercer Capital is pleased to sponsor the American College of Trust and Estate Counsel’s 2026 Fall Meeting, taking place October 15 through 18, 2026, at the Hyatt Regency Denver in Denver, Colorado. Bryce Erickson, ASA, MRICS, J. David Smith, CFA, ASA, and Sujan Rajbhandary, CFA, ABV, will attend on behalf of the firm.ACTEC’s national meetings bring together leading trust and estate lawyers, law professors, and other professionals for education, committee sessions, and peer discussion. This year’s professional program will address the prudent investment of unique and unusual assets; estate and business planning for farms, ranches, and oil and gas interests; publicity rights; digital assets; art collections; and assets held in regulated businesses.Bryce Erickson, ASA, MRICS, is a Managing Director and member of Mercer Capital’s board of directors. Since 1998, he has led approximately one thousand valuation engagements and has deep experience in gift, estate, and federal tax matters, litigation support, transactions, and business planning across a broad range of industries. Bryce leads Mercer Capital’s energy industry practice and is a regular contributor to Mercer Capital’s Energy Valuations Insights blog.J. David Smith, CFA, ASA, is a Senior Vice President at Mercer Capital and a senior member of the firm’s tax practice. He provides valuation services for tax planning, transactional purposes, and financial reporting, with particular experience in industries including financial services, oil and gas, and biotechnology. David is also a regular contributor to Mercer Capital’s Value Matters Newsletter.Sujan Rajbhandary, CFA, ABV, is a Senior Vice President and a member of Mercer Capital’s Gift, Estate & Income Tax Valuation Group. During his 20-year career at Mercer Capital, he has provided valuation and financial advisory services for tax planning and compliance, transactions, ownership transitions, and other corporate and shareholder matters. He is a regular contributor to Mercer Capital’s Value Matters Newsletter.Mercer Capital regularly works with attorneys, fiduciaries, business owners, and professional advisors on valuation matters involving gift and estate tax planning, trusts, ownership transitions, transactions, and disputes. The firm is proud to support ACTEC’s commitment to professional education and excellence in trust and estate law.Mercer Capital looks forward to reconnecting with friends and meeting new colleagues in Denver. For more information about the 2026 Fall Meeting, visit ACTEC’s event website.

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