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restriction placed on the transferability of the class A voting
shares, as contrasted to the nonrestricted transferability of the
class B nonvoting stock, plus the liquidation preferences provided
to the class B nonvoting stock, made the class B nonvoting stock as
valuable as or more valuable than the class A voting stock.
On the other hand, respondent contends that a voting privilege
premium should be given to the class A stock and that because of
the disparate ratio (or skewed distribution) between the number of
shares of voting stock outstanding and the number of shares of
nonvoting stock outstanding (1 to 1,848), the premium should be
expressed as a percentage of (or in relation to) the equity value
of J.R. Simplot Co.5 For the reasons that follow, we agree with
respondent.
The applicable statutory law, section 2031(a), requires the
"gross estate" of decedent to be determined for Federal estate tax
purposes "by including * * * the value at the time of his death of
all property, real or personal, tangible or intangible, wherever
situated." The standard for valuation is fair market value, which
5 As used by the experts, the term "equity value" means
J.R. Simplot Co's. enterprise value plus cash minus debt. In
determining J.R. Simplot Co.'s enterprise value, the experts
first valued the Company, exclusive of its Micron Technology
investment, using both an income and a market approach. The
value of the Company's Micron Technology investment was then
determined and added to the average of the values determined for
the Company under the income and market approaches.
We are mindful that this meaning of the term "equity value"
differs from that as used by accountants (namely, assets minus
liabilities of the Company). Herein, we use the experts'
meaning, rather than the accountant's meaning, of the term
"equity value".
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