-5-
2513.6 On a schedule attached to the return, gifts of 9,000
shares of the Company to Lawrence N. Thompson III, 1,050 shares
to Barbara E. Thompson, and 1,050 shares to Ann W. Jefferson were
reported. All of the shares were valued at $113.52 per share,
and the valuation was supported by the computations of James M.
Grant, C.P.A. (hereinafter Mr. Grant), the return preparer.
Mr. Grant valued the Company stock by capitalizing the 1984-
88 yearly average net profit per share at 15 percent, and
comparing the resulting figure of $189.80 to the book value per
share as of August 31, 1988, which was $159.48. After finding
the average of the two figures, $174.64, Mr. Grant then deducted
a discount of 35 percent for lack of marketability and the
transfer of a minority interest. The deduction for the discount
of $61.12, from the average of $174.64, resulted in the reported
valuation of $113.52 per share.
Both gift tax returns were selected for examination by
respondent. On August 1, 1991, Mr. Thompson and his accountant,
Mr. Grant, met with respondent's examining agent at the Company's
facilities in Milledgeville, Georgia. Respondent's examining
agent, an estate and gift tax attorney, was primarily interested
in discussing with Mr. Thompson and Mr. Grant the level of the
6Part I, line 16 of Mr. Thompson's Form 709 was marked with
an "X" in the "yes" column indicating that his spouse,
petitioner, intended to file a separate gift tax return for the
calendar year. The parties have stipulated that petitioner, in
fact, filed a Form 709 reporting the subject gifts.
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