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JFI
To support the values claimed for the JFI stock, petitioner
presented the testimony and expert reports of Richard D. Hitt,
Jr., of KPMG Peat Marwick (who had valued JFI for the estate tax
return) and Thomas A. Egan, Jr., of Management Planning, Inc.
(who had valued JFI in preparation for trial). Respondent
presented the testimony and expert report of Travis Keath of
Business Valuation Services, Inc. The parties stipulated that
all of these experts were qualified appraisers.
The parties stipulated that the undiscounted value of JFI
was $1,818 per share, and the task of the appraisers was to
decide to what extent to discount this value to reflect the value
of decedent’s one-third stock interest in the corporation at the
time of her death. Each of the experts calculated two discounts:
A minority interest (or lack of control) discount and a lack of
marketability discount.
Expert Opinion of Mr. Egan
Mr. Egan used two methods to value JFI: An asset method,
based on a comparison of the price-to-asset ratio of JFI with the
price-to-asset ratio of companies that in his judgment were
generally comparable to JFI; and an earnings method, based on the
investment value of JFI’s projected stream of earnings.
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Last modified: May 25, 2011