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

Heading: Expert Opinions of Fair Market Value

Text: 7 The Tax Court rejected in its entirety the opinion of valuation given by the estate's expert, Dr. Jerome F. Sherman, who relied upon a weighted average of historic book value and historic earnings in valuing the estate's stock. Dr. Sherman opined the value of the estate's stock in all five corporations was approximately $527,000. The Tax Court evaluated Dr. Sherman's methodology and explained in detail its deficiencies. 8 Three individuals employed by the Shenehon Company (Shenehon) prepared the Commissioner's expert report. The Tax Court agreed with Shenehon that four of the five closely held corporations were holding rather than operating companies. The Tax Court abbreviated the names of the four companies as Ford Mercantile, Ford Real Estate, Ford Dodge and Ford Van. These companies consisted of various assets including equipment and real estate which were leased to the operating company, Ford Storage & Moving, for the operation of its moving and storage business. The Tax Court found these four companies were holding companies because they were holding assets as investments rather than for income-producing purposes. 9 The Tax Court accepted Shenehon's opinion that the remaining corporation, Ford Storage & Moving, had components of both a holding and an operating company. The Tax Court agreed with Shenehon's opinion that certain assets owned by Ford Storage & Moving were not necessary to the operation of that business, and considered them to be similar to the assets of the other four companies. The assets found by the Tax Court and Shenehon to be unnecessary to active operations included marketable securities, a 36.19% stock interest in Ford Mercantile, amounts due from stockholders and excess cash. 10 Shenehon relied on net asset value in placing a value on the four holding companies and the holding portion of Ford Storage & Moving. A weighted average of three major valuation approaches was relied upon by Shenehon in determining the value of the operating portion of Ford Storage & Moving. Certain discounts were then applied, as discussed below, resulting in Shenehon's opinion of value of the estate's stock being approximately $2,420,000. 11 The Tax Court accepted Shenehon's methodology but allowed more discounts than did Shenehon. Following application of the allowed discounts as discussed below the Tax Court found the fair market value of the estate's stock was approximately $2,237,000. 12