Donald J. Janda - Page 7



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          believed that only a 20-percent discount should be applicable.4             
          We must decide whether a discount for lack of marketability is              
          appropriate, and, if so, to what extent.                                    
          Mr. Wahlgren’s Report                                                       
               To evaluate Mr. Wahlgren’s methodology for computing the               
          marketability discount, we first review his computation of the              
          value of the Company stock on a minority basis.  Before making              
          any fair market value determinations, Mr. Wahlgren evaluated the            
          assets, liabilities, and stockholders’ equity amounts listed on             
          the Company’s and the Bank’s books.  After reviewing the                    
          historical book values of the assets and liabilities of the Bank,           
          Mr. Wahlgren increased the asset amounts primarily for loans                
          previously charged off (from which interest and principal were              
          subsequently being recovered) and increased liabilities for                 
          deferred taxes associated with the increased amount in assets.              
          The Bank’s balance sheet was therefore adjusted as follows:                 

          Balance Sheet                                                               
              Items       Hist. BV     Adjustment   Adjusted BV                       
               Assets         $23,953,000   $2,397,000 $26,350,000                    
               Liabilities    19,436,000      815,000       20,251,000                
               Stockholders’                                                          
               equity         4,517,000    1,582,000   6,099,000                      



               4  Mr. Whalgren’s valuation for each of petitioners’                   
          separate transfers results in an amount of $108,436 (($46.24 per            
          share x .3423) x 6,850 shares).  This value is significantly                
          lower than the $145,357 value (per transfer) reported by                    
          petitioners on their gift tax returns.  A taxpayer who asserts a            
          valuation lower than the one reported on a tax return must                  
          provide cogent proof that the reported valuation was erroneous.             
          See Estate of Hall v. Commissioner, 92 T.C. 312, 337-338 (1989).            




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