- 39 -
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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