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respondent’s audits of the estate tax return and Mrs. True’s 1994
gift tax return. In preparing the 1993 and 1994 gift tax notices
and the estate tax notice, respondent used most of the entity
values determined by Mr. Lax but entirely disallowed the claimed
discounts.
Subsequently, Mr. Lax submitted a revised expert witness
report (final Lax report) and testified at trial regarding the
value of the estate’s interests in the True companies as of June
3 and 4, 1994. The final Lax report differed from the initial
Lax report in several ways; most importantly, the final Lax
report repudiated certain marketability discounts found in the
initial Lax report because AA had decided, subsequent to issuance
of the initial Lax report, that market data did not justify
measurable marketability discounts in connection with controlling
interests.
B. Petitioners’ Expert, Curtis R. Kimball
After petitions had been filed in these cases, petitioners
engaged Willamette Management Associates (WMA) to appraise the
transferred interests in the True companies. Curtis R. Kimball
(Mr. Kimball), a principal of WMA and its national director for
estate and gift tax matters, participated in the evaluations,
assisted in the preparation of the resulting reports, and
testified at trial on behalf of petitioners. Mr. Kimball has
performed valuations of business entities and interests, analyzed
publicly traded and private securities, and appraised intangible
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