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116 shares of stock in Glenwood Bank. Those shares were part of
1,000 nonpublicly traded shares of the only class of stock that
Glenwood Bank had outstanding at the time of decedent’s death and
represented an 11.6-percent interest in Glenwood Bank. The
estate tax return reported that the fair market value of each of
the 116 shares equaled its 1996 book value ($14,169) less a 45-
percent minority interest discount, resulting in a reported total
fair market value of $903,988.
When decedent died, Glenwood Bancorporation (Bancorporation)
owned the remaining 88.4-percent interest in Glenwood Bank. The
shareholders of Bancorporation were John Dean (Dean), Dean’s son,
and Dean’s son-in-law. Dean owned 69 percent of Bancorporation’s
stock, and he was unrelated familially to decedent.
Bancorporation purchased two blocks of Glenwood Bank stock
during the 15-month period ending on the date of decedent’s
death. First, in June 1995, Bancorporation purchased 10 shares
of Glenwood Bank stock at $1,000 per share. Second, in July
1996, Bancorporation purchased 7 shares of Glenwood Bank stock at
$1,500 per share.
After decedent died, Dean sought to buy the 116 Glenwood
Bank shares held by the estate. On May 15, 1997, Dean obtained
from the accounting firm of Seim, Johnson, Sestak & Quist, LLP
(Seim Johnson), a written appraisal (appraisal) of the fair
market value of those shares as of December 31, 1996. Seim
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