-4-
Johnson issued the appraisal to Dean solely to assist the
management of Glenwood Bank in making a cash purchase of the
shares. The appraisal was prepared on behalf of Seim Johnson by
Dennis R. Hein (Hein) and concluded that the fair market value of
the 116 Glenwood Bank shares held by the estate was $878,004
($7,569 per share) as of December 31, 1996. The appraisal stated
that this fair market value included a 29-percent discount for
minority interest and a 35-percent discount for lack of
marketability. The estate declined to sell its Glenwood Bank
shares to Dean at this appraised price. The estate sold those
shares to Bancorporation on October 24, 1997, for $1.1 million
($9,483 per share).
On July 18, 2001, respondent issued to the estate a notice
of deficiency in which he determined, among other things, that
the fair market value of decedent’s 116 Glenwood Bank shares was
$1.1 million. The notice states that “The value of the
decedent’s stock was adjusted to the fair market value as
determined by Shenehon Company.”
At trial, respondent called William C. Herber (Herber) as an
expert witness, and the Court over the objection of petitioners
recognized him as an expert on the valuation of financial
institutions. The Court also over the objection of petitioners
accepted into evidence Herber’s expert report under Rule 143(f)
(Shenehon report), written on behalf of his employer, Shenehon
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