-20-
year period before the date of each gift), and the formulas
described in Estate of Feldmar v. Commissioner, T.C. Memo. 1988-
429. He multiplied Crossroads' pretax weighted average income by
a price/earnings capitalization rate of five to estimate the
value for the stock. Wise calculated Crossroads' average claim
paid to show whether it had enough reserves to pay its historical
claims. He projected that the price/earnings value of
Crossroads' stock (using weighted average earnings) was $978 per
share as of January 1, 1992, and $1,537 per share as of January
1, 1993. He weighted the price/earnings method 60 percent and
the book value method 40 percent to estimate the value of
Crossroads' stock on the gift dates. He estimated that
Crossroads' stock was worth $1,083 per share as of January 1,
1992, and $1,554 per share as of January 1, 1993. He then
applied a 35-percent discount and estimated that the stock was
worth $704 per share as of January 1, 1992, and $1,010 per share
as of January 1, 1993.
C. Analysis
We accept KPMG Peat Marwick's reserve estimate and appraisal
of Crossroads' common stock instead of those of Gallagher or
Wise.
1. KPMG Peat Marwick
Respondent points out that Crossroads did not discount its
1991 and 1992 reserves for the time value of money, and contends
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