Estate of Helen J. Smith, Deceased, Frederic L. Foill II and Cassandra F. Vallery, Co-Executors - Page 39




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          Hitt,25 to Mr. Haywood’s asset-based value of $120.81 per share             
          results in an asset-based value of $82 per share.                           
               The second problem with Mr. Haywood’s approach relates to              
          his earnings-based value and his selection of a P/E ratio of                
          15.1, which we find to be too high.  Mr. Haywood acknowledged               
          that he used banks that were substantially larger than FNBW for             
          his comparable companies but contended that he was required to do           
          so by Rev. Rul. 59-60, 1959-1 C.B. 237, 238-239.  See Estate of             
          Newhouse v. Commissioner, 94 T.C. at 217 (Rev. Rul. 59-60 “has              
          been widely accepted as setting forth the appropriate criteria to           
          consider in determining fair market value").  In Mr. Haywood’s              
          view, Rev. Rul. 59-60, supra, requires the selection of companies           
          that are comparable in the sense of being “engaged in the same or           
          similar line of business”, but not comparable in size.  In his              
          view, the purpose of Rev. Rul. 59-60, supra, was to provide the             
          proper method for calculating the fair market value of small,               
          closely held companies using actively traded comparable                     
          companies, so that by definition the comparable companies would             
          be significantly larger and no adjustment for size should be                
          made.  We reject this view.  It is beyond dispute that we must              
          consider all relevant evidence.  See, e.g., Northern Trust Co. v.           
          Commissioner, 87 T.C. 349, 375 (1986).  Thus, while the sale                
          price of stock in businesses “engaged in the same or a similar              

               25 Only Mr. Hitt employed a minority discount in his                   
          analysis of FNBW, as Mr. Egan’s methodology did not require one.            





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