Estate of Frazier Jelke III, Deceased, Wachovia Bank, N.A., f.k.a. First Union National Bank, Personal Representative - Page 17

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          267 F.3d at 372.  The Court of Appeals also pointed out that, in            
          its view, an assumption that a hypothetical buyer would operate a           
          company whose expected growth was less than the buyer’s required            
          return was fatally flawed.  Id.                                             
               In Estate of Dunn v. Commissioner, supra, the decedent owned           
          a majority interest in a corporation primarily engaged in renting           
          out heavy construction equipment.  This Court, in deciding the              
          value of the corporation, assumed that a hypothetical buyer and             
          seller would give substantial weight to an earnings-based                   
          approach because the corporation was an operating company.  This            
          Court also gave some weight to an asset-based approach because              
          the corporation’s earnings projections were based on an                     
          atypically poor business cycle that would have produced an                  
          unreasonably low value.  In accord with that reasoning, this                
          Court used a 35-percent/65-percent combination of a cashflow                
          earnings-based approach and an asset-based approach,                        
          respectively, to value the company.  By using that combination of           
          the two approaches, we rejected the estate’s expert’s sole                  
          reliance on an asset-based approach, where he assumed a                     
          liquidation on the valuation date and reduction for the entire              
          amount of potential built-in capital gain tax liability.                    
          Although the capital gain tax rate at the corporate level was 34            
          percent, this Court used a 5-percent reduction for the built-in             
          capital gain tax liability in the asset-based portion of the                
          value computation to account for the lower likelihood of                    
          liquidation.                                                                





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