Estate of Helen J. Smith, Deceased, Frederic L. Foill II and Cassandra F. Vallery, Co-Executors - Page 12




                                       - 12 -                                         
          his weighted value for JFI, Mr. Egan estimated the value of JFI             
          to be $439 per share ($675 per share less 35 percent).  Thus,               
          according to Mr. Egan, the fair market value of decedent’s                  
          interest in JFI was $85,605 (195 shares x $439 per share).                  
               Court’s Analysis                                                       
               We find Mr. Egan’s report to be very persuasive and well               
          supported by his underlying reasoning.  We conclude, largely on             
          the basis of Mr. Egan’s report, that the fair market value of               
          decedent’s interest in JFI was $439 per share on the date of her            
          death.  Mr. Keath’s report, the only support for the                        
          substantially higher value determined by respondent, was                    
          seriously flawed and unpersuasive.                                          
               It is well established that, in general, an asset-based                
          method of valuation applies in the case of corporations that are            
          essentially holding corporations, while an earnings-based method            
          applies for corporations that are going concerns.  See Estate of            
          Ford v. Commissioner, T.C. Memo. 1993-580, affd. 53 F.3d 924 (8th           
          Cir. 1995).  JFI has characteristics of both, given the                     
          significance of real property in a farming operation, and we find           
          that it is appropriate to consider both asset- and earnings-based           
          values.  As we said in Estate of Andrews v. Commissioner, 79 T.C.           
          at 945:                                                                     
               regardless of whether the corporation is seen as                       
               primarily an operating company, as opposed to an                       
               investment company, courts should not restrict                         
               consideration to only one approach to valuation, such                  





Page:  Previous  2  3  4  5  6  7  8  9  10  11  12  13  14  15  16  17  18  19  20  21  Next

Last modified: May 25, 2011