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Value of JPMS at the moment immediately
prior to Mr. Mitchell’s death $150,000,000
Less: Discount to reflect the loss of
Mr. Mitchell to JPMS (15,000,000)
Value of JPMS at the moment of Mr.
Mitchell’s death 135,000,000
Percent of trust’s interest in JPMS x 49.04
Value of trust’s interest in JPMS before
discounts 66,204,000
Discount for lack of marketability and
minority interest (35%) (23,171,400)
43,032,600
Discount for possibility of lawsuit (1,500,000)
Value of trust’s interest in JPMS after
discounts 41,532,600
On appeal, the Court of Appeals for the Ninth Circuit vacated
our decision and remanded the case for findings to explain our
valuation. More specifically, the Court of Appeals stated that it
is unclear whether a 35-percent combined discount for lack of
control and lack of marketability falls within a range that is
supported in the record.
Additionally, the Court of Appeals directed us to shift the
burden of proof to respondent. Pursuant to the mandate of the
Court of Appeals, we shift the burden of proof to respondent.
Consequently, respondent has the burden of proving by a
preponderance of the evidence the existence and the amount of the
deficiency. Cohen v. Commissioner, 266 F.2d 5, 11 (9th Cir. 1959),
remanding T.C. Memo. 1957-172.
The deficiency in this case is attributable to the valuation
of 1,226 shares of JPMS common stock at the moment of decedent’s
death. On its estate tax return, the estate valued the shares at
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