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line of business” is relevant, it is not the only factor. Estate
of Hall v. Commissioner, 92 T.C. 312, 336 (1989); sec. 20.2031-2
(f), Estate Tax Regs. We believe that size is a relevant factor
in this case, at least when comparing FNBW to the substantially
larger companies in Mr. Haywood’s sample.26 Because Mr. Haywood
believed that Rev. Rul. 59-60, supra, precluded an adjustment for
size, we are puzzled as to why he assumed an adjustment for
location was appropriate; i.e., using the (higher) average P/E
ratio of banks in Ohio only rather than the (lower) average P/E
ratio of banks in the Midwest. Thus, we find that he has not
made a persuasive case for the higher average. We believe he
should have used the P/E ratio of his entire sample of 13.7.
Based on FNBW’s 1992 earnings of $1,423,000, use of the lower P/E
ratio results in an earnings-based value of $195 per share.
Finally, we disagree with Mr. Haywood’s method and result
in choosing a lack of marketability discount of 10 percent.
Rather than using comparisons such as those used by Mr. Hitt and
Mr. Egan, Mr. Haywood merely offered his subjective judgment of
what price a seller of the stock would accept. We find this
method somewhat arbitrary and unsupported in the authorities and
case law; moreover, it considers only half of the transaction;
that is, what the willing seller would accept, but not what the
willing buyer would pay. Moreover, contrary to his belief, we do
26 The smallest bank in Mr. Haywood’s sample had more than
10 times the assets, and the deposits, of FNBW.
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