-6-
15-percent minority interest discount and a 30-percent lack of
marketability discount to the values derived under those methods.
The book value method reflected Glenwood Bank’s reported equity
as of June 30, 1996, the most current data available as of
decedent’s date of death. The discounted cashflow method applied
a 14.5-percent discount rate to Glenwood Bank’s projected annual
income for each of the years during a 10-year period ending in
December 2005 and an 11.5-percent rate to the bank’s residual
value. The public guideline market method reflected prices paid
for companies which were engaged in a business similar to
Glenwood Bank’s and whose stock was actively traded in a public
market. The private guideline market method reflected
transactions involving acquisitions of privately held banks
comparable to Glenwood Bank. The resulting values derived under
these four methods were as follows:
Discounted Public Private
Book Cash Guideline Guideline
Value Flow Market Market
Value before discounts $14,135,000 $11,100,000 $14,000,000 $18,200,000
15-percent minority interest discount 2,120,250 n/a n/a 2,730,000
Marketable minority interest value 12,014,750 11,100,000 14,000,000 15,470,000
30-percent lack of marketability discount 3,604,425 3,330,000 4,200,000 4,641,000
Nonmarketable minority interest value 8,410,325 7,770,000 9,800,000 10,829,000
Subject percentage interest 11.6 11.6 11.6 11.6
Resulting value of subject interest 975,598 901,320 1,136,800 1,256,164
The average of the resulting values is $1,067,470.50
((975,598 + 901,320 + 1,136,800 + 1,256,164)/4).
At trial, petitioners called three experts to testify in
support of petitioners’ challenge to respondent’s determination
of the fair market value of decedent’s shares. Each of these
Page: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 Next
Last modified: May 25, 2011