Are We Overestimating the Value of Control in Estate-Planning Valuations?Are We Overestimating the Value of Control in Estate-Planning Valuations?

Gift tax planning transactions involving ownership interests in corporations, limited liability companies and partnerships usually involve the transfer of a noncontrolling interest in the business entity. However, it’s not uncommon for a valuation analyst to encounter a transfer of a controlling ownership interest or a decedent’s estate that holds a controlling business interest. In both cases, the controlling business interest may need to be valued for transfer tax purposes. 

In many circumstances, the value differential between a controlling ownership interest and a noncontrolling ownership interest in the same business may be substantial, especially in the context of an operating entity.¹ However, in certain instances, the value differ...