BizEquity Knowledgebase Support Center

What are the common discounts applied to minority (non-controlling) interests for estate and gift tax purposes?

Discounts and premia are a complex phenomenon and not readily summarized as it depends on why the valuation is being done and what the background environment entails. In addition, they are always "case-specific".


Feel free to forward the attachment which provides a very basic intro and overview of the DLOC and DLOM (two most common discounts in estate and gift tax valuations).


He can Google "discount for lack of marketability" and "discount for lack of control" for more information.


You can also inform the client that the BVI Course includes material on estimating discounts.


In general, one begins with the price per share of the 100% control value (the Bizequity "equity value" estimate), e.g. equity value equals $1m and there are 1m shares such that each share is $1.


From this $1 per share, a DLOC must be applied:


Marketable,Control $1.00

Less 25% DLOC .25

Non-Controlling,Marketable .75 per share

Less 33% DLOM .25

Non-Controlling, Non-Marketable .50 per share


Different terms are used to describe each "level of value", but the above is standard. The discounts for lack of control and lack of marketability reduced the value per share by a combined 50% on a multiplicative basis.