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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out of date.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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