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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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