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On approximately February 2, 1999, the executors of the
estate timely filed on behalf of the estate a Federal estate tax
return, whereon the estate, based on a valuation report of Goerig
and Paul M. Wichorek (Wichorek), an Alaskan accountant whom
Goerig had hired to assist him in the valuation, reported a total
value of $1,750,000 for the estate’s 20-percent stock interest in
TPC, or $3.59 per share ($1,750,000 � 487,440 shares = $3.59 per
share).
On audit, based on a valuation report dated November 9,
2000, prepared by Brian C. Becker, a valuation expert hired by
respondent, respondent determined a total value of $35,273,000
for the estate’s 20-percent stock interest in TPC, or $72.36 per
share ($35,273,000 � 487,440 = $72.36), and respondent determined
an estate tax deficiency of $17,910,408. Respondent also
determined that the entire $17,910,408 estate tax deficiency
determined was attributable to a substantial understatement and
therefore that under section 6662 the estate was subject to a
$7,164,163 gross valuation understatement penalty.
Shortly before trial, respondent’s expert prepared a revised
valuation report in which respondent’s expert adjusted downward
his valuation of the estate’s 20-percent TPC stock interest from
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