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On September 30, 1986, Lincoln Bank South's stock was
publicly traded at $3 per share, which was 61.2 percent of its
book value per share. Petitioner's expert concluded that Western
National Bank stock should be discounted substantially.
Petitioner’s expert calculated the amount of the discount by
using a letter written by Professor O. Maurice Joy of the
University of Kansas which was attached to petitioner’s expert’s
report. Respondent retained Professor Joy to value the stock of
Western National Bank and Scottsbluff National Corp. as of
September 30, 1986, and March 31, 1987. Professor Joy estimated
that the stock of Western National Bank had a fair market value
of $46 per share on September 30, 1986. Petitioner's expert
relied on that amount.
Scottsbluff National Corp. and Western National Bank agreed
to merge on March 4, 1987. Western National Bank's shareholders
received one share of Scottsbluff National Corp. stock for 3.3
shares of Western National Bank's stock. Petitioner’s expert
assumed that 3.3 shares of Western National Bank equaled the
value of one share of Scottsbluff National Bank which
petitioner’s expert estimated to be $233.09 per share. He
concluded that the fair market value of Western National Bank
shares on March 31, 1987, was $70.63 per share and the fair
market value of Kosman, Inc.’s holdings of Western National Bank
was $141,260.
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