- 8 - transactions are substantially contemporaneous to the valuation date and support respondent's valuation. Moreover, a public offering price is a factor which can be taken into account with due regard to be given to the time span between the valuation date and the sale to the public, and the contingencies inherent in a contemplated public offering. See Messing v. Commissioner, 48 T.C. 502, 509 (1967). The offering price of the IPO was $16 a share in August 1983. The IPO was also substantially contemporaneous to the valuation date and lends some support to respondent’s valuation.3 Petitioner contends that the book value, as of January 1, 1983, of $.31 a share is a better indicator of value than respondent’s determination of $11.20 a share. We have long stated that the book value of a stock is not a reliable basis from which to determine the stock's fair market value. See Evans v. Commissioner, 29 B.T.A. 710 (1934); Peavey Paper Mills v. Commissioner, T.C. Memo. 1960-237 ("Book value frequently bears no relationship to actual cash value or fair market value." (quoting Ketler v. Commissioner, 196 F.2d 822, 827 (7th Cir. 1952), revg. and remanding 17 T.C. 216 (1951))). Since we 3 We agree with the Court of Appeals for the Second Circuit that the public offering price cannot, without adjustment, be used to determine the fair market value of shares subject to transfer restrictions. See Biaggi v. United States, 909 F.2d 662, 681 (2d Cir. 1990). However, we do think that the public offering price does provide a comparable that, with adjustments, can assist in valuing the shares.Page: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 Next
Last modified: May 25, 2011