Michael W. and Caroline P. Huber et al. - Page 21

                                       - 21 -                                         
               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           






Page:  Previous  4  5  6  7  8  9  10  11  12  13  14  15  16  17  18  19  20  21  22  23  Next

Last modified: May 25, 2011