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In determining the fair market value of decedent’s 219,710
shares of Brookshire common stock (representing 9.79 percent of
all outstanding shares of Brookshire common stock), petitioner's
two experts and respondent's expert agree that a discount is
appropriate to reflect the lack of marketability of the stock.
They disagree, however, as to the amount thereof.
Because petitioner and respondent’s notice of deficiency
utilize the same $58.75 per-share value for the 112,884 shares of
Brookshire common stock that are not subject to the stock-
purchase agreement, we need only address the valuation of the
106,826 shares of Brookshire common stock that are subject to the
stock-purchase agreement.
Petitioner's first expert values the 106,826 shares of
Brookshire common stock subject to the stock-purchase agreement
at $6,302,734 or $59.00 per share. Petitioner's first expert
utilized: (1) The guideline company method, comparing
Brookshire's revenue, net income, earnings, cash-flow, and book
value with those of similarly sized, publicly traded corporations
operating grocery stores; (2) the discounted cash-flow method,
calculating the net present value and future earnings of
Brookshire and the return on investment using a 9-percent rate of
return; and (3) the capitalization of dividends method, using a
2-percent yield rate. Petitioner’s first expert also applied a
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