Opinion ID: 695213
Heading Depth: 2
Heading Rank: 1

Heading: Valuation of Holding Companies

Text: 19 The record reveals that the four holding companies owned assets which were leased to Ford Storage & Moving rather than being used to conduct active business operations. We do not find error with the Tax Court's characterization of these four companies as holding companies. 20 Both parties agree the Tax Court should consider the factors listed in Revenue Ruling 59-60 1 in determining the value of the estate's stock in the four holding companies. The parties disagree, however, on which factors should be given the most weight in making the ultimate determination of fair market value. The estate contends that book value and historical earnings should be given the greatest weight. The Commissioner contends that net asset value should be given the most weight. The Tax Court agreed with the Commissioner. 21 The estate relies on the opinion of its expert, Dr. Sherman, in contending that book value and earnings should be given the greatest weight. Dr. Sherman relied on unadjusted book values and historic earnings or cash flow to value the estate's stock. The Tax Court found use of unadjusted book values would understate the value of the holding companies' assets because many of the assets had been owned for several years and were fully depreciated. The Tax Court also found that an earnings analysis would not provide an accurate valuation of the holding companies because the holding companies were holding assets for investment rather than actively engaging in producing income. In a similar case, we found it was not improper for the Tax Court to conclude earnings alone were not a reliable indicator of value. Hamm v. Commissioner, 325 F.2d 934, 941 (8th Cir.1963). 22 The Tax Court is not bound to accept opinions of value provided by experts. Palmer, 523 F.2d at 1310 (holding the Tax Court does not have to accept 'in toto, in part' or at all expert opinion as to value). The Tax Court rejected Dr. Sherman's entire opinion, emphasizing his lack of qualifications and deficiencies in his methodology. We do not find the Tax Court clearly erred in rejecting Dr. Sherman's opinion. 23 The Commissioner relies on the opinion of her expert, Shenehon, in contending that net asset value should be given the greatest weight in calculating fair market value of the stock in the holding companies. Shenehon explained that underlying asset values provide an accurate valuation because the nature of the holding companies is to hold assets as investments for their long-term appreciation in value. The Tax Court agreed. 24 After considering the factors in Revenue Ruling 59-60, supra, the Tax Court found net asset values should be given the greatest weight in valuing the estate's stock in the four holding companies. We have previously stated that it is clearly for the Tax Court to decide the weight to be given to various factors. Hamm, 325 F.2d at 941; Palmer, 523 F.2d at 1310 (holding that the weight to be given each of the many valuation factors depends upon the facts of each case). We find the Tax Court considered the appropriate factors and based upon the evidence in the record the Tax Court did not clearly err in determining the fair market value of the estate's stock in the four holding companies.