Estate of Marcia P. Hoffman, deceased, Elisabeth Hoffman, Personal Representative - Page 38




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          corporate distributions from SCC and WLI, was intended to provide           
          for decedent in her later years because at sometime in the future           
          the corporations presumably “would have gone public”.  On the               
          basis of the evidence in the record, we believe WLI had little              
          possibility of going public as of the valuation date.  See Estate           
          of Klauss v. Commissioner, supra.                                           
               In his report and testimony, Mr. Mitchell stated that a beta           
          of 1.0 was chosen as an estimate because no reliable, comparable            
          companies could be found.  In his analysis, Mr. Mitchell                    
          augmented the market risk premium to account for investment in a            
          small company stock.  Mr. Mitchell testified that such an                   
          increased risk premium is the same as applying a beta of 1.74, or           
          a beta indicating a higher level of risk than market average, and           
          that the risk premium was intended to compensate for the                    
          inability to estimate the beta of WLI.33  Mr. Mitchell’s report             
          states that 5.3 percent is equivalent to the premium for                    
          investing in small company stocks as calculated by Ibbotson                 
          Associates, but Mr. Mitchell did not explain why such a figure is           
          appropriate for WLI specifically.  Mr. Mitchell assumed that a              
          beta of 1.0 was an appropriate estimate to use in valuing the WLI           
          stock under CAPM because he could not find any comparable                   
          publicly traded stocks.  As we noted earlier, the failure to                

               33Alternatively, Mr. Mitchell noted that the 5.3-percent               
          risk premium could be viewed as increasing the market risk                  
          premium to 12.5 percent.                                                    





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