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company that has a much greater dividend payout than Home and
Rock Hill will also have higher stock prices. Respondent made no
convincing argument in response.
A potential buyer of Home and Rock Hill stock would
reasonably assume that Home and Rock Hill would continue to pay
low dividends. A prospective minority shareholder of Home or
Rock Hill stock would almost exclusively consider dividend yield
rather than discounted cash-flow or income capitalization to
estimate the value of stock in either of these companies because
of the likelihood that he or she could only recoup his or her
investment through dividends. Hawkins properly considered
dividends to be the most significant factor because they are the
principal means by which a prospective shareholder could obtain a
return on his or her investment in Home and Rock Hill.
Where there are no sales available from which to ascertain
the fair market value of closely held stock, courts have
considered the amount of dividends which the corporation has
paid. See Estate of Newhouse v. Commissioner, 94 T.C. 193, 217
(1990); Estate of Leyman v. Commissioner, 40 T.C. 100, 119
(1963), remanded on other grounds 344 F.2d 763 (6th Cir. 1965);
Estate of Tebb v. Commissioner, 27 T.C. 671, 675 (1957); Estate
of Oman v. Commissioner, T.C. Memo. 1987-71 (Government expert
used valuation based in part on capitalization of dividends).
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