- 60 -
approach using REIT models, which emphasized asset values and
pretax levels of earnings and cash flow.
Mr. Chaffe applied a discount of approximately five percent
in order to reflect the fact that decedent's interest in Marrero
Land was governed by the voting trust and therefore was a non-
voting interest and a discount for lack of marketability of 40
percent. Mr. Chaffe determined that the fair market value of
decedent's interest in Marrero Land on the valuation date was
$20,917 per share, or $3,486,167.21
Respondent asserts that we should not rely on the respective
opinions of Mr. Stryker and Mr. Chaffe. Respondent contends
that, in considering the price-to-earnings ratios of publicly
traded companies under Mr. Stryker's market approach, he used the
latest-year earnings rather than the higher average three-year
earnings or the even higher average five-year earnings. Mr.
Stryker did not use the average five-year earnings because that
earnings level "was much higher than Marrero's expected future
recurring earnings level." We agree with Mr. Stryker's judgment
not to use the average five-year earnings. Mr. Stryker used the
average three-year earnings for 1985-1987 and the latest year
21Mr. Chaffe considered in his valuation analysis amended
article VI. However, because he determined that the fair market
value of decedent's interest in Marrero Land on the valuation
date was less than that book value and that, consequently, "the
book value purchase options would not be exercised", Mr. Chaffe
did not use that book value price in his valuation analysis.
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