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b. Petitioners’ Expert
Petitioners offered William H. Frazier (Mr. Frazier) as an
expert witness to testify concerning the valuation of the gifted
interest. Mr. Frazier is a principal of Howard Frazier Barker
Elliott, Inc. (HFBE), a Houston-based valuation and consulting
firm. He is a senior member of the American Society of
Appraisers and has been involved in valuation and general
investment banking activities since 1975. The Court accepted Mr.
Frazier as an expert in the valuation of closely held entities
and received written reports of HFBE into evidence as Mr.
Frazier’s direct and rebuttal testimony, respectively.
In his direct testimony, Mr. Frazier concludes that, based
on a 22-percent minority interest discount and a 35-percent
marketability discount, the fair market value of a 1-percent
assignee interest in MIL on the valuation date was $89,505.
Based on that figure, Mr. Frazier further concludes that the fair
market value of each petitioner’s one-half share of the gifted
interest on the valuation date was $3,684,634 (a figure that, due
to rounding, is slightly lower than the value reported on the
Forms 709).11
11 Mr. Frazier asserts that a 41.167-percent assignee
interest in MIL (i.e., one-half of the gifted interest) has no
more proportionate value than a 1-percent assignee interest
therein, and respondent’s expert does not dispute that assertion.
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