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2. Respondent's Expert: Francis X. Burns
Respondent relies on the expert report of Francis X. Burns,
a principal of IPC Group, LLC (IPC), a Chicago-based consulting
firm. Mr. Burns, who holds a master of management degree in
finance and economics from Northwestern University's Kellogg
School of Management, valued Johnco based on the fair market
value of its assets. Mr. Burns’ use of an asset approach is
supported by Rev. Rul. 59-60,21 1959-1 C.B. 237, 243, which
states:
The value of the stock of a closely held
investment or real estate holding company * * * is
closely related to the value of the assets
underlying the stock. For companies of this type
the appraiser should determine the fair market
values of the assets of the company. * * *
In support of his choice, Mr. Burns noted that Johnco: (1) Was
classified as a personal holding company on its 1990 and 1991
returns; (2) had only one employee; and (3) produced no goods or
services other than the contracted sale of a percentage of timber
growth each year. He also found it significant that petitioner
and respondent had stipulated the fair market value of Johnco's
assets. Because the fair market value of the assets was
stipulated, Mr. Burns' report focused on evaluating the merits of
petitioner's position regarding the valuation discounts it
sought.
21 Rev. Rul. 59-60, 1959-1 C.B. 237, outlines factors to be
considered in valuing the stock of closely held corporations and
“has been widely accepted as setting forth the appropriate
criteria to consider in determining fair market value”. Estate
of Newhouse v. Commissioner, 94 T.C. 193, 217 (1990).
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