- 32 -
under that agreement; however, we give it relatively little
weight.
Prior Stock Transaction Method
Mr. Engstrom relied upon the February 26, 1995, redemption
of Mr. Kucklick’s 12 shares of common stock. He concluded that
since the redemption occurred in close proximity to the gift date
for the HII shares, the purchase price of Mr. Kucklick’s shares
provided a reliable indication of the fair market value of HII
stock. Mr. Engstrom concluded that the values of the 8-year
covenant and the 3-year employment agreement were not material,
and his valuation assumes that the entire purchase price in the
redemption transaction was a payment for the 12 shares of common
stock. Mr. Engstrom determined that the price that Mr. Kucklick
received in the redemption transaction indicates that the fair
market value of HII stock was approximately $329,500 per share as
of November 15, 1995. Mr. Engstrom gave a significant amount of
weight, 40 percent, to the value resulting from his prior stock
transaction method. We agree with Mr. Engstrom that the
proximity of the redemption transaction in relation to the gift
of shares makes that transaction relevant to the question of fair
market value of HII stock. See Rabenhorst v. Commissioner, T.C.
Memo. 1996-92. However, we are not convinced that the value Mr.
Engstrom derived from that transaction accurately reflects the
value of HII stock.
Page: Previous 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 NextLast modified: May 25, 2011