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Respondent offers a final reason we should not consider the
sales of Huber stock to be at arm’s length. He argues that the
Huber shareholders, by not offering their shares for sale to the
public, failed to obtain the optimum price, which respondent
assumes is higher than the E&Y value. Respondent suggests that
“it is not unreasonable to assume that an unrelated individual or
corporation would be willing to pay a premium, in excess of the
value Huber corporation sets, to invest in the company.”
Respondent corroborates this argument by suggesting that the
bylaws of Huber provide a right-of-first-refusal provision
whereby shares offered to nonfamily members could be purchased by
the corporation at a price generally higher than the value that
E&Y computes. We disagree.
We reject the notion that Huber must take itself public in
order to sell its shares at a fair price. Courts have long
recognized the rights of shareholders in closely held companies
to remain private. Estate of Hall v. Commissioner, 92 T.C. 312
(1989). In addition, the CEO, Mr. Francis, provided in his
testimony bona fide business purposes for staying private. He
testified that keeping Huber private would allow the company to
advance key values and have a long-term view of its business.
Respondent takes his argument a step further by postulating
that the bona fide business purpose of maintaining family control
should be set aside if it serves as a device to “pass an interest
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