-29-
subject to valuation (e.g., the death of a key employee). See
Estate of Jung v. Commissioner, 101 T.C. at 431.
The record before us does not establish the presence of any
material change in circumstances between the date of the third
sale and the applicable valuation date. On the basis of the
record before us, we believe that the sole adjustment that must
be made to the $1.1 million sale price in order to arrive at the
fair market value of the subject shares as of the applicable
valuation date is for inflation. While the record does not
accurately pinpoint the appropriate rate to apply for that
purpose, the Bureau of Labor Statistics has stated that the rate
of inflation during each of the years 1996 and 1997 was slightly
less than 3 percent. See generally Handbook of U.S. Labor
Statistics, Employment, Earnings, Prices, Productivity, and Other
Labor Data 342 (7th ed. 2004). On the basis of a 3-percent rate,
we conclude that the applicable fair market value of decedent’s
116 shares was $1,067,000 ($1,100,000 x (1 - .03)).6 We so hold.
6 Although we do not determine this fair market value on the
basis of the methodology applied by Herber, we note that this
fair market value approximates the average of the resulting
values derived by Herber through the application of his four
methods.
Page: Previous 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 NextLast modified: May 25, 2011