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selected a minority discount rate of 30 percent using overall
market averages, one based on a survey of market activity recent
to the valuation date and another being the highest median
premium in the 12-year period including the valuation date.
Generally, the average of all companies is not a good indicator
of the subject company. See Northern Trust Co. v. Commissioner,
87 T.C. 349, 384 (1986). Although petitioner’s expert does not
present industry-specific control premium data, petitioner argues
for using the control premium of construction companies (45
percent, which converts to a minority discount of 31 percent).
As consistently reported in its audited financial statements, IHC
performed most of its jobs on a stand-alone basis. Thus, it more
closely resembles a construction company than a general
contractor. Consequently, we agree that the 45-percent control
premium that respondent’s expert reports for construction
companies is appropriately used for IHC. Accordingly, an inverse
31-percent minority discount should be applied to petitioner’s
IHC stock.2
Dividing the $3,800,000 value for IHC as a whole by the
6,340 shares outstanding results in a value of $599.40 per share.
2 Although the use of a 45-percent control premium would
affect the value computed by respondent’s expert under the market
comparable approach, we need not consider this because of our
conclusion that the market comparable approach is not reliable in
this case.
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