Estate of Pauline Welch, Deceased, Newton G. Welch, Jr. and Lois Welch McGowan, Co-Executors - Page 4

                                        - 4 -                                         

          discount to reflect the corporations' built-in capital gains tax            
          liability.                                                                  
               In determining the value of decedent's shares of ESI and ISC           
          on the estate tax return, the estate combined the Mercer                    
          valuation of the corporations' value with estimates of the value            
          of the real property owned by both corporations, and then applied           
          a 34-percent discount for built-in capital gains on the real                
          property and a 50-percent discount for decedent's minority                  
          interest.3  The estate's computation is as follows:                         
                                   ESI                    ISC                         
          Mercer value             $670,000            $1,809,000                     
          Real estate value         750,000               500,000                     
               total value    1,420,000                2,309,000                      
          Less:  discount for                                                         
          capital gains on real                                                       
          estate (34%)             255,000             170,000                        
          Less:  50% discount for                                                     
          minority interest         582,500             1,069,500                     
                                                                                     
               discounted value     582,500            1,069,500                      
          Number of shares                                                            
          outstanding              570                 836                            
          Per share value          1,020.84            1,276.02                       
          Number of shares owned                                                      

               3  As for the capital gains discount, the estate did not               
          deduct the adjusted basis of the properties owned by ESI or ISC.            
          The capital gain rate of 34 percent was applied to the estimated            
          real estate values of the respective properties.  The parties               
          agree that the estate should have deducted the adjusted basis               
          from the estimated real estate values.  Our holding makes this              
          computational adjustment unnecessary.                                       




Page:  Previous  1  2  3  4  5  6  7  8  9  10  11  12  13  14  15  Next

Last modified: May 25, 2011