May T. Rakow - Page 6




                                        - 6 -                                         

          id.  We may accept the opinion of an expert in its entirety, see            
          Buffalo Tool & Die Manufacturing Co. v. Commissioner, 74 T.C.               
          441, 452 (1980), or we may be selective in the use of any portion           
          thereof, see Parker v. Commissioner, 86 T.C. 547, 562 (1986).               
               When valuing stock in the absence of arm’s-length sales, the           
          following factors are taken into consideration:  The company’s              
          net worth, prospective earning power and dividend-paying                    
          capacity, and other relevant factors.  See sec. 25.2512-2(f),               
          Gift Tax Regs.  The other relevant factors include:                         
               the good will of the business; the economic outlook in                 
               the particular industry; the company’s position in the                 
               industry and its management; the degree of control of                  
               the business represented by the block of stock to be                   
               valued; and the values of securities of corporations                   
               engaged in the same or similar lines of business which                 
               are listed on a stock exchange.  However, the weight to                
               be accorded such comparisons or any other evidentiary                  
               factors considered in the determination of a value                     
               depends upon the facts of each case. * * *  [Id.]                      
          Petitioner’s Expert                                                         
               Petitioner presented the opinion of George H. Reddin of FMI            
          Corp., a management consulting firm to the construction industry            
          (petitioner’s expert).  Petitioner’s expert valued IHC on a                 
          minority interest basis at $2,161,467, or $340.93 per share.                
               Petitioner’s expert first valued IHC according to the cost             
          or asset approach.  Beginning with the book value of IHC on                 
          September 30, 1992, of $3,397,339, he made downward adjustments             
          for taxes ($138,005) and a “doubtful” account receivable                    






Page:  Previous  1  2  3  4  5  6  7  8  9  10  11  12  13  14  15  16  17  18  19  20  Next

Last modified: May 25, 2011