Estate of Charles a. Boratello, Deceased, C. Norman Borgatello and Josephine E. Donnelly, Co-Executors, and C. Norman Borgatello, Successor Trustee to the Charles A. Borgatello Living Trust - Page 22

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            Value of Mr. Borgatello's Interest in VIC                                                  
                  Knowing the value of MVS and MVN, we are now able to decide                          
            the price at which Mr. Borgatello's 82.76 percent stock interest                           
            in VIC "would change hands between a willing buyer and a willing                           
            seller, neither being under any compulsion to buy or to sell and                           
            both having reasonable knowledge of the relevant facts."  Sec.                             
            20.2031-1(b), Estate Tax Regs.  In the case of unlisted stock,                             
            such as the stock in question, the price at which sales of such                            
            stock are made in arm's-length transactions in an open market is                           
            the best evidence of value.  See Estate of Davis v. Commissioner,                          
            110 T.C. 530, 535 (1998).  The record in the instant case does                             
            not contain any such sale of stock.  Where the value of unlisted                           
            stock cannot be determined from actual sale prices, its value                              
            generally is to be determined by taking into consideration a host                          
            of factors, including, among others, the company's net worth,                              
            prospective earning power, and dividend-paying capacity.  See,                             
            e.g., Estate of Davis, supra at 536.                                                       
                  When valuing a real estate holding company, however, the                             
            main emphasis is on the company's assets.  See id.  The net asset                          
            value method is the most reasonable one to use in a case such as                           
            the instant case, where the corporation functions as a holding,                            
            rather than an operating, company and earnings are relatively low                          
            in comparison to the fair market value of the underlying assets.                           

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Last modified: May 25, 2011