- 2 -
be $3,585.50 per share. The disparate valuations are
primarily attributable to the valuation methodologies
employed by the parties.
Held: On the basis of the facts and circumstances
presented, a premium for voting privileges is appropriate
and is determined in relation to the equity value of the
Company (enterprise value plus cash minus liabilities).
After application of a 35-percent marketability discount,
the fair market value of the voting stock is $215,539.01
per share and after application of a 40-percent
marketability discount, the fair market value of the
nonvoting stock is $3,417.05 per share.
II.
In the notice of deficiency, respondent reduced the
amount reported for the marital deduction from
$15,127,237 to $1,723,437. The amount of this reduction
($13,403,800) is due to: (1) Respondent's redetermination
of the fair market value of the voting stock, all of
which was bequeathed to the trustees of a credit shelter
trust for the benefit of decedent's children, and (2) the
charging of the Federal estate tax to that portion of the
estate (the residue) passing to decedent's wife. In
calculating the amount of the marital deduction,
respondent did not consider the amount of State transfer
and inheritance taxes which are payable with respect to
the value of the voting stock bequeathed to the trustees
of the credit shelter trust and which pursuant to
decedent's will are chargeable against that bequest.
Held: Because no State transfer or inheritance
taxes have yet been paid, and because the amount of the
marital deduction must be recalculated on the basis of
our determination of the value of the voting stock
passing to the trustees of the credit shelter trust, the
parties must consider (and not reduce the marital
deduction by) the amount of State transfer and
inheritance taxes actually and timely paid by reason of
the bequest of the voting stock to the trustees of the
credit shelter trust.
III.
In the notice of deficiency, respondent determined
that petitioner is liable for penalties pursuant to sec.
6662(a), (g), (h)(1), and (2)(C), I.R.C. The penalties do
not apply to any portion of the underpayment for which
the taxpayer: (1) Had reasonable cause, and (2) acted in
good faith with respect thereto.
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