Johann T. and Johanna Hess - Page 32

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          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.                                                         






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