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corporations engaged in the same or a similar line of business
which are listed on an exchange.” See also sec. 20.2031-2(f),
Estate Tax Regs.; Rev. Rul. 59-60, 1959-1 C.B. 237, 242.
The parties sharply dispute whether (1) the two guideline
companies chosen by Dr. Spiro, the Robert Mondavi Corp. (Mondavi)
and Canandaigua Wine Co. (Canandaigua), were comparable to Korbel
for purposes of section 2031(b), (2) Dr. Spiro actually utilized
only one company, Mondavi, as a guideline company, and (3) if so,
the use of a single guideline company is permissible. The
parties also disagree as to the propriety of the financial ratios
chosen by Dr. Spiro and his adjustments to those ratios.
Petitioner also claims, and respondent denies, that Dr. Spiro’s
30-percent weighting of the result of his market approach was
essentially arbitrary.
B. Dr. Spiro’s Guideline Companies: Mondavi and
Canandaigua
1. Dr. Spiro’s Method
Dr. Spiro first identified 1,317 companies listed under the
Standard Industrial Classification Code (SIC) 2084, wines,
brandy, and brandy spirits. Of those companies he identified
only 11 that were publicly traded, and he rejected 9 of the 11 as
potential comparables because, for the most part, they were
either too large or diverse (or both), too small, unprofitable,
or conducted business in a different manner than Korbel.
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