- 10 -
Respondent contends that Johnson incorrectly assumed that
Green Light would grow at 5 percent. Shortly before trial, Green
Light’s management told Johnson that it had projected that Green
Light would grow at a rate of 5 to 10 percent in 1993.9 We
disagree with respondent’s contention that Johnson incorrectly
assumed that Green Light would grow at 5 percent because Fuller
also used a 5-percent growth rate for Green Light. Respondent
contends that Johnson selected incorrect growth rates for the
guideline companies because the sources of his data were
unreliable. We disagree in part. Johnson reasonably selected
growth rates for Green Light and the guideline companies other
than American Vanguard using financial data relating to periods
before the valuation date. See Estate of Jung v. Commissioner,
101 T.C. 412, 423-424 (1993); Estate of Newhouse v. Commissioner,
94 T.C. 193, 217 (1990).
Johnson chose a 15-percent growth rate for American Vanguard
in part because its earnings grew 33 percent annually from 1988
to 1992, and its export sales grew from $800,000 in 1990 to $4.7
million in 1993. However, in light of the fact that the earnings
of Green Light grew faster than those of the guideline companies
9 In 1999, Bruce Johnson (Johnson) interviewed Forrest Gray
(Gray), the secretary and treasurer of Green Light, about the
anticipated future growth rate of Green Light as of the valuation
date. Gray told Johnson that, in 1993, the management of Green
Light expected the company to grow at a rate of 5 to 10 percent
per year.
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