-23-
Hill's historic earnings. Respondent contends that Hawkins
should not have included a small stock premium. We agree. In
Estate of Jung v. Commissioner, 101 T.C. 412, 444 (1993), we
declined to apply a small stock premium because the taxpayer's
expert did not provide evidence that an investment in the
corporation in question was riskier simply because of its small
size. Like the expert in Estate of Jung, Hawkins did not show
that Home and Rock Hill were riskier merely because they are
small. On the contrary, he concluded that Home and Rock Hill are
financially sound and that investments in Home and Rock Hill were
much less risky than in other comparably sized companies since
the business of Home and Rock Hill is highly regulated.
4. Hakala's Analysis
We believe that Hakala did not adequately consider that:
(a) Neither Home nor Rock Hill stock is likely to be sold, (b)
the Barnes and Helmly families intend to retain control of their
companies, (c) Home and Rock Hill paid low dividends, (d) Rock
Hill nonvoting stock had no right to participate in any decision
related to the company and Home voting stock had about a 1-
percent vote that was ineffectual, and (e) an owner of a 1-
percent interest in either Home or Rock Hill would find it hard
to resell his or her interest. Hakala admitted that Rock Hill
will not be sold or taken public.
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