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consider how much CSB would have paid to decedent’s estate for
those amounts under the 1973 agreement.
Petitioner does not dispute the appropriateness of using a
redemption price established by the parties but argues that the
agreed redemption price was $5 million. We disagree because,
as we found above, the $5 million payment was for both stock
redemption and any claims for work in process.
Respondent's expert properly considered the 1973 agreement
and the 1988 amendment. In contrast, petitioner's expert
disregarded the agreements.
Spiro concluded that, on June 30, 1988, CSB had retained
earnings of $592,233 and undistributed pretax earnings of
$1,109,883, of which $665,398 was available to distribute to the
shareholders after paying Federal and State corporate income
taxes. Spiro added retained earnings and undistributed pretax
earnings available for distribution after paying taxes for total
retained earnings for CSB of $1,256,631.10 Spiro multiplied
$1,256,631 by decedent's 71.43 percent interest in CSB ($897,594)
and added decedent’s $10,000 basis in his stock. He concluded
that the value of decedent’s shares was $907,594. Thus, under
the 1973 agreement, CSB would have redeemed decedent’s CSB stock
10 Petitioner's expert calculated that CSB had a lower
amount of retained earnings of $1,087,799. We apply respondent's
expert's calculation of retained earnings because it is more
favorable to petitioner.
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