- 79 -
his view that the life insurance proceeds should be accounted for
as a dollar-for-dollar increase in the value otherwise determined
for BCC.
The estate contends that this treatment of life insurance
proceeds is inconsistent with Estate of Huntsman v. Commissioner,
66 T.C. 861 (1976), because it leads to an increase in BCC’s
value equal to those proceeds. We disagree. In Estate of
Huntsman v. Commissioner, supra at 874, we observed that “it is
* * * obvious that the price paid by a willing buyer would not
necessarily be increased by the amount of the life insurance
proceeds.” (Emphasis added.) We rejected the Commissioner’s
position in that case that life insurance proceeds, received by
the corporation upon the death of the shareholder whose shares
were being valued, produced a dollar-for-dollar increase in the
corporation’s value because his position “would treat the life
insurance proceeds differently than other nonoperating assets.”
Id. at 875. The income-based valuation approach employed in
Estate of Huntsman multiplied earnings by a price-earnings ratio
without factoring nonoperating assets into the income-based
value. The life insurance proceeds therefore did not affect the
income-based value; they were accounted for only as part of the
asset-based value. Since the asset-based value produced only a
proportionate impact on the final blended value, the life
Page: Previous 62 63 64 65 66 67 68 69 70 71 72 73 74 75 76 77 78 79 80 81 NextLast modified: May 25, 2011