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the average net income and the average amount of life insurance
in force of the five comparable firms were $18,922,000 and
$7,344,000,000, respectively; RLIC’s net income was $348,000 in
1988, and the amount of its life insurance in force was
$50,221,000 for the same year. Making matters worse, despite
these dissimilarities, Chaffe‘s report does not mention how and
to what extent adjustments were made to account for such
differences.
Section 4.02(h) of Rev. Rul. 59-60, 1959-1 C.B. at 242,
cautions that it is necessary to exercise care when selecting
companies that are to serve as comparables so as to avoid
comparing inherently dissimilar companies that are otherwise in
the same or similar lines of business. In light of the magnitude
of the differences between RLIC and the publicly traded firms
considered by Chaffe, along with the general lack of specificity
of his report, we question the precision of his conclusion.
Petitioners improperly construe the text of Rev. Rul. 59-60,
supra, and section 25.2512-2(f), Gift Tax Regs. Neither the
ruling nor the regulation can be read to require that the share
price of a closely held corporation be based upon share prices of
publicly traded companies. Albeit both Rev. Rul. 59-60, supra,
and section 25.2512-2(f), Gift Tax Regs., explain that the share
price of publicly traded corporate stock is a relevant factor to
be considered, both the ruling and regulation continue and
explain that weight is to be accorded to all relevant factors
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