Johann T. and Johanna Hess - Page 17

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          testimony if it is within the range of values that may be                   
          properly derived from consideration of all the evidence.  Id.               
          After considering the parties arguments, all the facts and                  
          circumstances relevant to this case, and the opinions of                    
          petitioners’ and respondent’s experts, we conclude that the fair            
          market value of the shares of HII stock that Mr. Hess gave to the           
          trust falls somewhere in the middle of the range of values                  
          suggested by the parties and their experts.16                               
          Mr. Heebink’s Expert Opinion                                                
               Mr. Heebink arrived at a value of $128,000 per share for the           
          HII stock.17  His valuation relied upon a discounted cashflow               
          analysis and a market comparable analysis.  However, as we                  
          explain in more detail below, Mr. Heebink’s valuation analysis              
          relies upon an adjustment to HII’s financial information, which             
          resulted in a significant decrease in HII’s earnings figures for            


               16Generally, the Commissioner’s determination of fair market           
          value bears a presumption of correctness, and the burden of                 
          proving that determination is incorrect rests with the taxpayer.            
          See Rule 142(a).  However, in certain circumstances, the burden             
          of proof as to that determination shifts to the Commissioner                
          under sec. 7491(a).  Petitioners do not argue that sec. 7491(a)             
          applies, and the record does not disclose the date the                      
          examination commenced.                                                      
               17Mr. Heebink prepared four reports for this case.  He                 
          determined the fair market value of HII shares as of Nov. 11,               
          1995; he prepared a supplemental report in which he addressed               
          items that respondent’s expert relied upon in his report; he                
          valued HII shares as of Feb. 26, 1995, the date the redemption              
          agreement was executed; and he valued the 8-year covenant as of             
          that date.                                                                  




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