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management, a lack of diversification in business, an overdependence
on one supplier, H�agen-Dazs, and on one primary “rainmaker”, Arnold,
who was leaving, the risk of petitioner’s being completely eliminated
from business as an independent wholesale distributor, the effective
veto H�agen-Dazs had over any sale to a third party, the fact that
petitioner is a closely held, family-owned business, and the declining
ratio of net income to sales, we find that a value of $276,509 is the
upper limit to a fair estimate of the value of petitioner immediately
prior to the transactions at issue.
Respondent's determination of the value of assets sold to H�agen-
Dazs by SIC, and the corresponding value of SIC stock distributed to
Arnold, is presumptively correct, and the burden of proving a lower
value rests on petitioner. Rule 142(a); Frazee v. Commissioner, 98
T.C. 554, 562 (1992); Pessin v. Commissioner, 59 T.C. 473, 480 (1972).
In the present case, respondent did not present the testimony or
report of an expert upon which to consider an alternative valuation.
Petitioner, on the other hand, did present the report and testimony of
Mr. Bergwerk, and has thereby effectively rebutted respondent's
original determination. Although Mr. Bergwerk's methodology was
flawed, his conclusion is only erroneous insofar as his $276,509
value for petitioner results in an overstatement of the fair market
value of the SIC stock distributed to Arnold. Petitioner has carried
its burden of reducing respondent's determination of $1,430,340 to
$141,000 (51 percent of the value of petitioner) but has not carried
the burden of reducing the value any further. See Hess v.
Commissioner, 24 B.T.A. 475, 478 (1931) (Court adopted taxpayer's
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