- 4 - for the 1988 stock transfer in the amount of $385. Willis’ computation is as follows: Capital $310,000 Special surplus 1,000 Unassigned surplus 5,579,972 Mandatory securities valuation reserve 636,475 Subtotal $6,527,447 Plus: 1.5 x annual premium income 2,659,323 Subtotal 9,186,770 Less: 35% discount 3,215,370 Total discounted value 5,971,400 Total discounted value 5,971,400 Divided by: Shares outstanding 15,500 Discounted per-share value $385 In October 1990, petitioners’ tax counsel complied with an earlier request and provided an agent for respondent with a written explanation of Willis’ computation of the discounted per- share value for the 1988 stock transfer. The principal focus of this correspondence concerned the 35-percent minority interest discount factor and the addition of 1-1/2 years’ annual premium income. In 1992, in reaction to respondent’s having initiated an examination of petitioners’ 1988 gift tax returns, petitioners’ tax counsel hired David B.H. Chaffe III (Chaffe), of Chaffe & Associates, Inc., to conduct a second appraisal of RLIC and the 1988 stock transfer. Chaffe’s appraisal report was provided toPage: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 Next
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