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agreements entered into by unrelated parties at arm’s length in
similar businesses. In the instant case, the estate must
demonstrate that the terms of the Modified 1981 Agreement are
similar to terms in agreements entered into by unrelated parties
in businesses similar to that of BCC.
The only evidence proffered by the estate on this point was
the expert report and testimony of Mr. Grizzle. Mr. Grizzle
opined that the terms of the Modified 1981 Agreement were
comparable to similar arrangements entered into at arm’s length
within the meaning of section 2703(b)(3) because the price
provided in the agreement for decedent’s BCC shares was fair
market value.27 His conclusion regarding BCC’s fair market value
was based upon an income approach in which he postulated that
BCC’s value was equal to a multiple of four times earnings. He
claimed that such a multiple was commonly used to value
construction companies by those knowledgeable about the industry.
He further claimed that such a multiple was implicit in the sale
prices for three purportedly comparable companies he examined.
He did not present evidence of other buy-sell agreements or
similar arrangements, where a partner or shareholder is bought
27 Mr. Grizzle opined that $4 million was a fair market
value price for the shares as of either the date of execution of
the 1996 Agreement (Nov. 11, 1996) or the date of decedent’s
death (Sept. 21, 1997).
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