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Blockage Discount

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Blockage Discount
A discount that an institutional investor applies to a block trade with another institutional investor. That is, if an institutional investor wishes to divest itself of all or most of its holding in a security, it may apply a blockage discount to sell it more quickly. This has the added advantage of not causing a crash in the price of the security because of increased trading volume because the blockage discount causes a trade below the market price.


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The concept of a blockage discount in art is borrowed from business valuation.
Within six months after the decedent's death, the executor a) sold 60,000 shares of the stock at $90 per share and b) distributed the balance of the shares to the beneficiaries when the value without a blockage discount was $95 per share.
The Service rejected this argument and determined the DOD value of the taxable estate was $6,399,230, which reflected the blockage discount.
 
 
 
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