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Court’s Analysis
We found Mr. Hitt’s approach to be less useful than Mr.
Egan’s, largely because he did not provide as much detail from
which we could judge the merits of his reasoning. Moreover, we
believe that his decision to give 75 percent of the weight to
earnings-based value and 25 percent to asset-based value was
incorrect, considering all the facts and circumstances of JFI.
As we noted earlier, “the value of the underlying real estate
will retain most of its inherent value even if the corporation is
not efficient in securing a stream of * * * income.” Estate of
Andrews v. Commissioner, 79 T.C. at 944. Mr. Hitt’s choice of
weights ignores this principle. Ultimately, however, we note
that by applying Mr. Egan’s weighting but otherwise accepting Mr.
Hitt’s report, we reach a result fairly close to the value of JFI
we have found to be correct. Applying a weight of 70 percent to
Mr. Hitt’s asset-based value of $564 per share and 30 percent to
his earnings-based value of $243 per share results in a value of
$468 per share, a value much closer to the Court’s value of $439
per share than to the value proposed by respondent of $1,029 per
share.
Expert Opinion of Mr. Keath
In valuing the JFI stock, Mr. Keath calculated an asset-
based value only, because he believed that no part of the value
of JFI should be attributed to earnings.
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