Estate of Emily F. Klauss - Page 8

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               Johnson reasonably based the small-stock premium he used in              
          his report on data from Ibbotson Associates.6  Later data from                
          Ibbotson Associates7 show that the small-stock premium has                    
          declined since about 1983 or 1984, but that small capitalization              
          stocks were yielding higher average returns than large                        
          capitalization stocks in 1993.                                                
               Respondent attached to respondent’s opening brief an                     
          appendix which shows that large capitalization stocks have                    
          outperformed small stocks since about 1988.  We do not consider               
          the information in the appendix because respondent provided no                
          source for it.                                                                
               Respondent relies on an article by Bajaj & Hakala,                       
          “Valuation for Smaller Capitalization Companies”, published in                
          Financial Valuation:  Businesses and Business Interests, ch. 12A              
          (Hanan & Sheeler ed. 1998), for the proposition that there is no              
          small-stock premium.  We find Johnson’s analysis to be more                   
               Fuller testified that it is appropriate to use the Ibbotson              
          Associates data from the 1978-92 period rather than from the                  
          1926-92 period because small stocks did not consistently                      

               6  See Ibbotson Associates, Stocks, Bonds, Bills &                       
          Inflation, 1993 Yearbook 128 (Ibbotson 1993); see also Estate of              
          Hendrickson v. Commissioner, T.C. Memo. 1999-278 (citing id. at               
               7  See Ibbotson Associates, Stocks, Bonds, Bills &                       
          Inflation, 1999 Yearbook 121 (Ibbotson 1999).                                 

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