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Courts recognize that a comparable company valuation may be
rejected where the companies relied on are not sufficiently
similar to the company being valued. In Estate of Jung v.
Commissioner, 101 T.C. 412, 433 (1993), significant differences
between the companies used as comparables and the company being
valued caused the Court to reject the comparable public company
method. In Estate of Klauss v. Commissioner, T.C. Memo. 2000-
191, an expert’s comparability analysis was found to be
inadequate because the expert failed to take into account
differences in size, product mix, customer concentration, and
other factors between the companies used as comparables and the
company being valued.
With regard to “the other factors” referred to in section
2031(b) to be taken into account in the valuation of private,
closely held companies, section 20.2031-2(f), Estate Tax Regs.,
explains, in part, as follows:
(f) Where selling prices or bid and asked prices
are unavailable. If the provisions of paragraphs (b),
(c), and (d) of this section are inapplicable because
actual sale prices and bona fide bid and asked prices
are lacking, then the fair market value is to be
determined by taking the following factors into
consideration:
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