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Thus, the language of the stock plan itself suggests that
the initial purchase price of $60.98 per share was less
than the fair market value of the stock at the time the
stock plan was adopted.
Further, petitioner himself testified at trial that
he believed the value of SWI increased at the moment he
joined the company. Because petitioner purchased the
subject stock after he officially joined the company, the
value of the stock was, by his own admission, greater
than it was at the time the $60.98 price per share was
established. Thus, we find that the price of $60.98 per
share established in the original acquisition transaction
and the Share Compensation Plan does not provide an
accurate measurement of the value of the stock.
Events occurring after the valuation date provide
additional evidence that petitioner's stock in SWI was
worth more than $60.98 per share on June 30, 1989.
First, in a letter dated June 14, 1990, KPMG Peat Marwick
valued a noncontrolling interest in SWI at $2,500 to
$2,700 per share as of March 31, 1990, only 9 months
after the valuation date. Second, in a confidential
private placement memorandum, Goldman Sachs & Co. and
Alex. Brown & Sons, Inc., determined this value to be
approximately $15,000 per share as of October 1, 1990.
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