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testified that shareholders who had left CSB before decedent died
were not paid based on the shareholders’ agreement but were paid
on an ad hoc basis. We do not so find based on the record here
relating to the departures of Fowler and Sucherman from CSB.
2. Petitioner’s Expert
As stated above, petitioner’s expert, Johnson, appraised CSB
at $5,200,000 and decedent's 71.43-percent interest in CSB at
$3,714,000.
Johnson used four valuation approaches to estimate the value
of CSB:
Valuation Method Estimated Value
Adjusted book value $5,607,000
Discounted discretionary cash-flow 5,209,000
Excess earnings analysis 4,520,000
55% rule of thumb 4,789,000
60% rule of thumb 5,125,000
To apply the adjusted book value method, Johnson considered
two assets not included in CSB’s books: (a) CSB’s reimbursable
client expenses; i.e., out-of-pocket costs advanced by CSB in
contingency fee cases that are reimbursed when the client
receives a settlement or judgment award, and (b) CSB’s work in
process on its contingent fee cases. Johnson concluded that
CSB should treat its reimbursable client expenses as an asset
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