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weighed MD&F’s earnings, and placed too much emphasis on Mr.
DiSanto's role in MD&F.
2. Whether We Consider the 1995 Redemption of MD&F Stock
Respondent contends that the 1995 redemption is persuasive
evidence of the fair market value of Mr. DiSanto’s MD&F stock
because it resulted from arm’s-length negotiations. We disagree.
We believe that Fred DiSanto caused MD&F to pay more than
fair market value to redeem his brother’s stock because he wanted
to provide benefits to his brother’s family and also to continue
to provide employment for other family members. Fred DiSanto
credibly testified that he caused MD&F to overpay to redeem the
stock in 1995. Other MD&F employees disagreed with his decision
to redeem the stock for $26.81 per share. The redemption was
emotional for the DiSanto family. Emotional factors may preclude
a redemption price from representing fair market value. See,
e.g., Krapf v. United States, 977 F.2d 1454, 1461 (Fed. Cir.
1992) (intrafamily sale of stock to company founder who would go
to great lengths to secure survival of the distressed company was
not reliable evidence of fair market value).
Respondent points out that negotiations occurred and that
Pope represented the DiSanto children. However, those facts do
not negate the emotional factors that, we believe, led Fred
DiSanto to agree to an excessive redemption price. We give no
weight to the 1995 redemption as evidence of fair market value of
MD&F stock in 1992 and 1993.
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