Kevin B. Kimberlin and Joni R. Steele, et al. - Page 14

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          textbooks upon which he relied were 6 years old and two editions            
          out of date.                                                                
               In his analysis of whether Ciena stock had an ascertainable            
          fair market value, respondent’s expert inexplicably insisted that           
          contemporaneous arm’s-length sales of Ciena series B stock (i.e.,           
          the 7,354,092 shares Ciena sold in 1994 and 1995 for $1.50 per              
          share) were not pertinent in determining the stock’s fair market            
          value.  He stated:                                                          
               I don’t know if the relevant facts can show a value of                 
               $1.50 to be prudent and reasonable.  It’s just unclear.                
               There’s no fact pattern to suggest the $1.50 is                        
               reasonable other than there’s unrelated parties                        
               transacting a negotiated price. [Emphasis added.]                      
          When the Court later questioned whether he was “trying to                   
          determine fair market value”, respondent’s expert stated that               
          fair market value could not be determined, as a certified                   
          financial analyst he was obligated to follow a “higher standard”,           
          and he attempted to determine the “intrinsic value” of the                  
          warrants.  In sum, we find respondent’s expert’s report and                 
          testimony of no value.4  See Parker v. Commissioner, 86 T.C. 547,           
          561 (1986) (opinion testimony must be weighed in the light of the           

               4  Pursuant to sec. 7491(a), petitioners have the burden of            
          proof unless they introduce credible evidence relating to the               
          issue that would shift the burden to respondent.  See Rule                  
          142(a).  Our conclusions, however, are based on a preponderance             
          of the evidence, and thus the allocation of the burden of proof             
          is immaterial.  See Martin Ice Cream Co. v. Commissioner, 110               
          T.C. 189, 210 n.16 (1998).                                                  

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