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helped the DiSanto children negotiate the redemption of Mr.
DiSanto’s MD&F stock. Fred DiSanto represented MD&F in the
negotiations. The redemption price was $26.81 per share, more
than any of the appraisals at that time. Other MD&F employees
opposed paying that much to redeem Mr. DiSanto’s stock. Fred
DiSanto thought this price exceeded fair market value, but agreed
to it to help his brother’s family, his son, Rocco DiSanto, and
his nephew, Jason Yates. MD&F also agreed to pay each of the
children $315,000 to not compete with MD&F.
MD&F filed an insolvency petition with the U.S. Bankruptcy
Court on November 4, 1997.
OPINION
A. Fair Market Value of Mr. DiSanto’s MD&F Stock on November
26, 1992
1. Contentions of the Parties
The parties dispute the value of Mr. DiSanto's 186,177
shares of MD&F stock (a 53.5-percent interest) when he died on
November 26, 1992.
Petitioners contend that the fair market value of Mr.
DiSanto's MD&F stock was $2,263,912 ($12.16 per share). This
value is less than respondent’s and petitioners’ expert’s
estimates. Petitioners contend that petitioners' and
respondent's expert failed to consider (1) that MD&F was not
profitable after 1991, (2) the effect on MD&F of the death of Mr.
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