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Petitioners also claim that Mr. Engstrom erred in failing to
consider HII’s financial information for the most recent quarter
before the gift of shares; i.e., the quarterly results for August
to October 1995. We are not convinced that this was error.
Indeed, petitioners’ expert did not consider this information in
his market comparable analysis. Also, Mr. Gaynor did not update
his valuation for the gift tax returns to account for HII’s
performance after July 31, 1995. Further, Mr. Engstrom explained
that a prospective buyer might ask questions regarding the more
recent quarterly information, but would not consider a loss in
that quarter overly alarming where the company uses the completed
contract method of accounting.
Although we question certain aspects of Mr. Engstrom’s
guideline companies analysis, and we cannot agree that the value
he derived under that analysis is entitled to the weight he gave
it, i.e., 40 percent, we find that value provides at least some
indication of the fair market value of HII stock. Indeed, it
appears to us that the major separation in the value that Mr.
Heebink derived in his market comparable analysis and in the
value that Mr. Engstrom derived in his guideline companies
analysis is attributable to the erroneous $2.5 million adjustment
that Mr. Heebink made to cost of sales in his analysis. See
supra note 23.
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