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Petitioner has cited to us no authority prohibiting an
inquiry into plans for a public offering. We assume that a
potential purchaser would be interested in such plans and might
pay a premium depending on her judgment of the likelihood of such
an offering. Indeed, in his report, Klemm tells us that
(1) professional investment firms had purchased the preferred
stock in the corporation, and (2) it is typical for a high
technology startup company to sell convertible preferred shares
to venture capital investors. We assume that venture capital
investors invest with the hope, if not the expectation, that a
public offering will not be too far off.
Klemm’s failure to take any account of a public offering,
which actually occurred within 8 months of decedent’s death, and
the possibility of which was discussed before his death, seems to
us unwarranted. It seems to us that Klemm turned his back on a
datum that he should have considered. Klemm’s decision to ignore
the possibility of a public offering adds to our dissatisfaction
with his report. Cf. Messing v. Commissioner, 48 T.C. 502, 509
(1967) (public offering price is a factor to be taken into
account in valuing shares of stock in a company that was
privately held on the valuation date; due regard must be give "to
the time span involved between the critical dates and the dates
of sale to the public, as well as to the contingencies inherent
in the successful culmination of a contemplated public
offering.").
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