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evaluate the opinion evidence of an expert in light of the
qualifications of the expert. See Parker v. Commissioner, supra
at 561. In light of the significant operational aspects of Dunn
Equipment, the size of the block of stock in issue, the identity
and attitudes of the remaining shareholders and directors, and
the costs associated with liquidation, we conclude that the
hypothetical investor would give earnings value substantial
weight.
It is well established that, as a general rule, earnings are
a better criterion of value for operating companies and net
assets a better criterion of value for holding or investment
companies. See Rev. Rul. 59-60, 1959-1 C.B. 237, 242; Estate of
Newhouse v. Commissioner, 94 T.C. at 217 (Rev. Rul. 59-60 “has
been widely accepted as setting forth the appropriate [valuation]
criteria”). Thus, because Dunn Equipment was an operating
company, the better question is not whether we should disregard
the earnings-based value, but whether we should disregard the
asset-based value. In Estate of Andrews v. Commissioner, 79 T.C.
at 945, we stated:
regardless of whether the corporation is seen as
primarily an operating company, as opposed to an
investment company, courts should not restrict
consideration to only one approach to valuation, such
as capitalization of earnings or net asset values.
Certainly, the degree to which the corporation is
actively engaged in producing income rather than merely
holding property for investment should influence the
weight to be given to the values arrived at under the
different approaches but it should not dictate the use
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