- 8 -
C&L Bailey Stock
In the notice of deficiency, respondent determined that the
date-of-death value of decedent’s 50 shares of C&L Bailey stock
was $451,263, rather than $370,708, as shown on decedent’s estate
tax return. Similarly, respondent determined that the date-of-
death value of the 50 shares of C&L Bailey stock includable in
decedent’s estate as QTIP property under section 2044 was
$451,263.
In determining these values, respondent relied upon an
October 1996 valuation report (the original Smith report) that
had been prepared for the trust by Dennis C. Smith (Smith), a
certified public accountant and certified valuation analyst in
Hot Springs, Arkansas. The original Smith report concluded that
the total, undiscounted fair market value of C&L Bailey as of the
date of decedent’s death was $3,610,200, or $18,051 per share.
Applying a 25-percent marketability discount to this indicated
value, the original Smith report concluded that the date-of-death
value of decedent’s 50 shares of C&L Bailey stock was $13,358 per
share.
In the notice of deficiency, respondent adopted Smith’s
conclusions, but increased Smith’s 25-percent discount rate by an
additional 25 percent, to match the 50-percent combined discount
reflected on the estate tax return. Applying this 50-percent
discount to the values indicated by the original Smith report,
Page: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 Next
Last modified: May 25, 2011