- 5 -
valuation date. See Estate of Andrews v. Commissioner, 79 T.C.
938, 940 (1982); sec. 20.2031-2(b), Estate Tax Regs.
In the absence of arm's-length sales, the Court decides the
stock's fair market value by considering factors such as the
company's net worth, prospective earning power, dividend-paying
capacity, management, goodwill, position in the industry, the
economic outlook in its industry, and the values of publicly
traded stock of comparable corporations. See sec. 2031(b);
Estate of Hall v. Commissioner, 92 T.C. 312, 336 (1989); Estate
of Andrews v. Commissioner, supra. There is no fixed formula for
applying these factors. The weight accorded each factor is
determined by the facts and circumstances of each case. See
Messing v. Commissioner, 48 T.C. 502, 512 (1967). As the trier
of fact, the Court has broad discretion in weighing the various
factors. See Estate of O'Connell v. Commissioner, 640 F.2d 249,
251 (9th Cir. 1981), affg. on this issue T.C. Memo. 1978-191.
When valuing unlisted stock, it is sometimes appropriate to
apply a lack of marketability discount to the price in order to
reflect the absence of a recognized market for closely held stock
and to account for the fact that closely held stock is generally
not readily transferable. See Mandelbaum v. Commissioner, T.C.
Memo. 1995-255, affd. 91 F.3d 124 (3d Cir. 1996); Estate of
Trenchard v. Commissioner, T.C. Memo. 1995-121; Rev. Rul. 77-287,
1977-2 C.B. 319, 320-321. This discount also may reflect the
expense of registering the unlisted stock for public sale. See
Page: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 Next
Last modified: May 25, 2011