-15-
The Commissioner has also set forth in a longstanding
ruling, Rev. Rul. 59-60, 1959-1 C.B. 237, certain criteria to
consider in determining fair market value. That ruling, which is
widely accepted in the valuation community and which is regularly
referenced by the judiciary and the Commissioner alike, Polack v.
Commissioner, supra at 611, states that the
Valuation of securities is, in essence, a prophesy as
to the future and must be based on facts available at
the required date of appraisal. As a generalization,
the prices of stocks which are traded in volume in a
free and active market by informed persons best reflect
the consensus of the investing public as to what the
future holds for the corporations and industries
represented. When a stock is closely held, is traded
infrequently, or is traded in an erratic market, some
other measure of value must be used. In many
instances, the next best measure may be found in the
prices at which the stocks of companies engaged in the
same or a similar line of business are selling in a
free and open market. [Rev. Proc. 59-60, sec. 3.03,
1959-1 C.B. at 238.]
The ruling then states that in the absence of relevant market
quotations, all available financial data and all relevant factors
affecting fair market value must be considered in valuing the
stock of a closely held corporation. Id. sec. 4.01. The ruling
lists as relevant eight specific factors. These factors, which
are virtually identical to the factors referenced in section
20.2031-2(f), Estate Tax Regs., are:
(a) The nature of the business and the history of
the enterprise from its inception.
(b) The economic outlook in general and the
condition and outlook of the specific industry in
particular.
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