Discount for lack of marketability (DLOM) is a valuation reduction applied to ownership interests that cannot be easily sold or converted to cash, such as shares in a closely held business or restricted stock. Because there is no ready public market and sales may be constrained by agreements or practical limitations, investors demand a price discount relative to otherwise similar publicly traded interests. DLOM is a key consideration in estate, gift, and charitable-planning valuations where illiquidity materially affects fair market value.

Advisors see discounts for lack of marketability in appraisals used for gifting business interests to heirs or trusts, designing buy-sell agreements, or funding life insurance strategies. Appraisers justify DLOM using studies of restricted stock, pre-IPO transactions, and company-specific factors. Properly supported discounts can lower taxable values and leverage estate and gift tax exemptions. Understanding discount for lack of marketability helps advisors coordinate with valuation experts and explain to clients why illiquid interests often receive substantial, but defensible, valuation reductions.