-24-
used in Estate of Feldmar to convert Crossroads' weighted average
earnings in that the Court in Estate of Feldmar applied the
capitalization rate to posttax earnings and Wise applied it to
pretax earnings. The corporation in Estate of Feldmar sold life
insurance, individual and family accident and health insurance,
vehicle warranty/service contracts, and collateral protection
services; Crossroads sells only workers' compensation
reinsurance. Unlike life insurance, workers' compensation
reinsurance is long-tail insurance because of the length of time
before a reinsurer's obligations mature. See S. Rept. 99-313, at
502 (1986), 1986-3 C.B. (Vol. 3) 502. This makes the size of the
reinsurer's reserve much more important because the reinsurer's
liability can extend for longer periods. Id.
D. Discount
Petitioner argues that we should apply a 35-percent discount
for minority interest and lack of marketability to Gallagher's
estimate of the value of Crossroads' stock (zero for January 1,
1992 and $331 per share for January 1, 1993), and thus contends
that the stock was worth zero on January 1, 1992, and $215 per
share on January 1, 1993.
Respondent agrees that petitioner is entitled to lack of
marketability and minority interest discounts. Respondent
applied a 35-percent discount to the fair market value of
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