Greene Corporation, a closely held corporation, is owned by Al Manx with 6,000 shares, Bob Barnes with
Question:
Greene Corporation, a closely held corporation, is owned by Al Manx with 6,000 shares, Bob Barnes with 2,500 shares, and Cora Crowley with 1,500 shares. In the current year, Cora passed away.
Asa result of Cora’s death, the executor contacts you about valuing Cora’s closely held stock. In your analysis, you discover that Greene Corporation has average earnings over the representative period of
$80 per share. Also, over the same period, it has paid $20 of dividends per share. The book value of Greene Corporation is $50 per share. Since the stock is not very marketable and Cora had a minority interest, you have concluded that a discount of 25 percent is appropriate for lack of marketability and minority interest.
Required: Value Cora’s closely held stock interest for estate tax purposes. In your research, review the case of Central Trust Co.
v. U.S., 62-2 ustc 412,092, 305 K2d 393 (Ct Cl 1962) for the applicable weights to be assigned to the valuation factors of earnings, dividends, and book value.
Step by Step Answer:
CCH Federal Taxation Basic Principles 2020
ISBN: 9780808051787
2020 Edition
Authors: Ephraim P. Smith, Philip J. Harmelink, James R. Hasselback