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In valuing stock of a closely held corporation, one of the
factors to be considered is the book value of the stock. See
Rev. Rul. 59-60, sec. 4.01(c), 1959-1 C.B. at 238. Thus, the
value derived under the net asset value method is entitled to
some weight in valuing HII stock. However, in deciding the
relative weight to give to the net asset value in valuing a
corporation, we must consider the extent to which the company is
actively engaged in producing income as opposed to simply holding
property for investment. See Estate of Andrews v. Commissioner,
79 T.C. at 945; Estate of Ford v. Commissioner, T.C. Memo. 1993-
580, affd. 53 F.3d 924 (8th Cir. 1995). If the company is an
operating company as opposed to a holding company, the net asset
value method should be accorded less weight. See Ward v.
Commissioner, 87 T.C. 78, 102 (1986).
HII and its subsidiaries represent an ongoing business
actively engaged in producing income as opposed to simply holding
assets for investment. HII was relatively profitable in the
years leading up to the valuation date. Indeed, HII experienced
a “banner year” in fiscal year 1995 with $64.25 million in sales
and $4.17 million in net income. The financial information for
the prior fiscal years indicated that HII was a growing company,
and HII’s financial projections reflected that HII expected to
expand upon its growth and profitability in the years that
followed the gift. Under these circumstances, the net asset
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