Johann T. and Johanna Hess - Page 44

                                       - 44 -                                         
               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.                                                              








Page:  Previous  31  32  33  34  35  36  37  38  39  40  41  42  43  44  45  46  47  48  49  50  Next

Last modified: May 25, 2011