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$861,485, for a total deficiency of $1,100,000. Consequently,
petitioner bears the burden of proof to show error in
respondent’s initial determination of a $2,229,043 value in
decedent’s Dunn Equipment stock, whereas respondent bears the
burden of proving any value in excess of the initial
determination. See Rule 142(a); Welch v. Helvering, 290 U.S. 111
(1933); P.D.B. Sports, Ltd. v. Commissioner, 109 T.C. 423, 444
(1997).
The dispute in the instant case concerns the proper method
for valuing an interest in a company in which asset-based value
and earnings-based value are widely divergent. Petitioner argues
that the value of decedent’s 62.96-percent interest should not
exceed $1,582,185, based on a 50-50 weighting of asset- and
earnings-based values. Respondent, on the other hand, argues
that the value of decedent’s interest is equal to 62.96 percent
of Dunn Equipment’s net asset value, minus an appropriate
discount for lack of marketability and lack of super-majority
control, for a final value of $4,430,238.
Fair market value is defined as “‘the price at which the
property 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 relevant facts.’” United
States v. Cartwright, 411 U.S. 546, 551 (1973) (quoting sec.
20.2031-1(b), Estate Tax Regs.). The best method to value a
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