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interest position. Mr. Browning selected a 25-percent minority
interest discount for the common equity of JM and Specialty based
on the considerations that no dividends were paid before 1951, no
dividends were expected to be paid, and that the shareholders
were expected to have a long liquidation period before they could
sell their shares. Mr. Browning combined the discount rates and
applied a 60-percent discount to the common equity value of JM
and Specialty, resulting in values of $146,000 and $64,000,
respectively. These values yielded per-share values of $.80 for
JM common stock and $64 for Specialty common stock.
iv. Valuation of JM Stock Options
Mr. Browning determined that the JM common stock held by
Joseph and subject to an option by Cyril did not have any value
because he valued the JM common stock at $.80 per share and the
option price was $1 per share. If the per-share value had
exceeded the option price, then Mr. Browning argues that the
option would have been exercised. Because the options were not
exercised, Mr. Browning concluded that they did not have any
value as of October 31, 1951.28 With respect to the Nichols
options, Mr. Browning did not determine that any portion of the
value of the stock should be apportioned to Cyril. The estate
has not argued that the Nichols options must be considered in
28Note, however, that the estate’s brief alleges that Cyril
did not have the money necessary to exercise the options.
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