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2. Petitioners' Expert
Petitioners rely on the expert report of Francis X. Burns
(Mr. Burns) and Brian R. Oliver (Mr. Oliver) of IPC Group, LLC
(IPC). Messrs. Burns and Oliver are both experienced in business
valuation and, in addition to their undergraduate degrees, hold
master’s degrees in finance from Northwestern University's
Kellogg School of Management. Although Messrs. Burns and Oliver
are not formally accredited as appraisers, we are satisfied that
they are qualified to perform a business valuation. Fed. R.
Evid. 702; see Martin Ice Cream Co. v. Commissioner, 110 T.C.
___, ___ (1998) (slip op. at 52).
IPC valued the FIC shares using two approaches: A
capitalized income method (income method) and a multiple of
EBITDA method (EBITDA multiple method).
Applying the income method, IPC determined per-share values
for the stock transferred in the 1980 Gifts and the 1981
Recapitalization of $7,388 and $4,273, respectively. Value was
determined under the income method by capitalizing a measure of
normalized earnings, adding the fair market value of nonoperating
assets, and then applying a marketability discount to the per-
share value. IPC determined normalized earnings using net
operating cash-flow available to equity holders (NCF), adjusted
to reflect noncash charges. In valuing the 1980 Gifts, IPC used
the NCF for FY 1979, a 10-month fiscal year. A weighted average
of the net operating cash-flows for the previous 3 years was used
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