Walter L. Gross, Jr., and Barbara H. Gross - Page 22




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          40-percent corporate income tax rate for the zero-percent                    
          corporate rate he first assumed.  Offsetting for interest payment            
          deductions, Dr. Bajaj calculated that the resulting market                   
          capitalization dropped from $286 million to $188 million, a                  
          34-percent reduction, which amount was within 10 percent of the              
          weighted average value ($171,993,000) computed by Mr. McCoy.                 
               Petitioners argue for tax affecting not only on the basis of            
          the testimony of their expert witnesses, but also on the basis               
          that respondent has advocated that adjustment and must be held to            
          it.                                                                          
               B.  Petitioners' Position                                               
               Petitioners introduced into evidence two internal documents             
          of the Internal Revenue Service:  (1) a valuation guide for                  
          income, estate, and gift taxes (the guide), and (2) an                       
          examination technique handbook for estate tax examiners (the                 
          handbook).                                                                   
               We read those excerpts as neither requiring tax affecting               
          nor laying the basis for a claim of detrimental reliance.  The               
          guide, in relevant part, reads:                                              
               * * *  [S] corporations are treated similarly to                        
               partnerships for tax purposes.  S Corporations lend                     
               themselves readily to valuation approaches comparable                   
               to those used in valuing closely held corporations.                     
               You need only to adjust the earnings from the business                  
               to reflect estimated corporate income taxes that would                  
               have been payable had the Subchapter S election not                     
               been made.                                                              






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