Lack of marketability discounts — from the IRS’s perspective
Abstract: Interests in closely held companies typically are entitled to a discount for lack of marketability (DLOM), because an interest that can’t readily be sold on a national stock exchange is worth less than a comparable interest in a publicly traded company. But determining the amount of the discount can be tricky. A few years ago, the IRS released a report, Discount for Lack of Marketability: Job Aid for IRS Valuation Professionals, which provides a critique of common methods valuators use to calculate the discount and offers valuable insight into IRS views on the subject. This article offers the highlights of that IRS report.