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among other assets, 18 shares of class A voting stock and 3,942.048
shares of class B nonvoting stock of J.R. Simplot Co. The fair
market value for both the class A voting shares and class B
nonvoting shares owned by decedent on the date of his death was
reported at $2,650 per share. (Accordingly, the aggregate fair
market value of the 18 class A voting shares was reported at
$47,700, and the aggregate fair market value of the 3,942.048 class
B nonvoting shares at $10,446,427.) This valuation was based upon
an appraisal by Morgan Stanley, dated December 9, 1993.
The total number of outstanding shares of J.R. Simplot Co.
used by Morgan Stanley in its appraisal erroneously included
treasury shares held by J.R. Simplot Co. Using the correct number
of shares outstanding, and the same methodology Morgan Stanley
employed, the fair market value of decedent's class A voting and
class B nonvoting shares of J.R. Simplot Co. would have been
approximately $3,025 per share (in lieu of $2,650 per share as
reported).
K. Notice of Deficiency
Respondent issued a notice of deficiency to petitioner, dated
September 9, 1997, determining an estate tax deficiency of
$17,643,886 and penalties of $7,057,554, pursuant to section
6662(a), (g), (h)(1), and (2)(C). The deficiency and penalties are
primarily based upon respondent's redetermination of the value of
the 18 shares of class A voting and 3,942.048 shares of class B
nonvoting stock of J.R. Simplot Co. owned by decedent on the date
of his death. Respondent increased the value for the 18 shares of
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