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valuation date, ZSI was worth $2 million, and the 1,040,000
gifted nonvoting common shares of stock in ZSI were worth 50
cents each. Petitioner timely filed his Form 709, United States
Gift (and Generation-Skipping Transfer) Tax Return, and therein
reported cumulative annual gifts of $520,000 in accordance with
the appraisal report.
Following an examination, respondent determined that, on the
valuation date, the 1,040,000 gifted nonvoting common shares of
stock in ZSI were worth $1.65 each and issued a notice of
deficiency to that effect. Just prior to trial, however,
respondent retained an appraisal company to appraise the value of
the gifted shares of stock in ZSI as of the valuation date. Brad
Cashion, an appraiser with that company, toured ZSI’s facilities
and interviewed Mr. Rhoads. Mr. Rhoads was primarily responsible
for ZSI’s daily operations and for coordination of those
operations with the Postal Service. Mr. Cashion prepared an
appraisal report that concluded that, as of the valuation date,
ZSI was worth $3,800,000--comprising $3,630,000 as an operating
company and $170,0004 in nonoperating assets--and that the
1,040,000 gifted nonvoting common shares of stock in ZSI were
4This nonoperating asset was stock listed on ZSI’s balance
sheet at $170,316.
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Last modified: May 25, 2011