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IRS Over-Values Interest in Kohler Company by $100 Million Dollars

Kohler v. Commissioner of Internal Revenue, T.C. Memo. 2006-152, 2006 WL 2059210 (U.S. Tax Ct. 2006)

The Kohler Company, established in 1887, is a large, privately owned manufacturer or plumbing products, engines, and switchgear. It also owns and operates hospitality and real estate businesses. The dispute before the Tax Court arose as a result of disagreements as to the value of Kohler Company stock held by the estate of Frederic Kohler, one of the founder’s grandchildren. On its estate tax return, Frederick’s estate estimated the value of the stock to be $47,009,625. The IRS claimed that the value was $144,500,000, and assessed a tax deficiency of $53,650,000 plus an accuracy-related penalty of $10,723,941. The taxpayer challenged both the deficiency and the penalty. There were much smaller disputes between other Kohler family members and the IRS over gift taxes for the same year, 1998, which were to be governed by the outcome of the estate tax deficiency case.

Kohler has always been a privately held company, with a small number of shares held by individuals outside the Kohler family. Kohler stock has never been registered with the SEC or traded on a public exchange. Because of the closely-held nature of the company, since 1900 Kohler consistently paid 7%-10% annual dividends, even during recessionary times, because management was aware of the shareholders’ dependence on that stream of income and the shares would not be sold.
The company used two types of projections to plan its business: the Management Plan and the Operations Plan. The Management Plan consisted of achievable targets, reflecting real-world economic situations and management’s best judgment of the company’s position. This plan was shared with outsiders intending to do business with the company, such as lenders or insurers. The Operations Plan, on the other hand, represented the “best-case” scenario: what the company could achieve in the perfect environment, with maximum productivity and results.

Frederick died in 1998. Later that some year, the company went through a reorganization to get rid of non-family shareholders. In this 1998 reorganization, Kohler family members could exchange their old shares for either $52,700 cash per share or a package of new stock, while non-family shareholders’ only options were to either accept the cash-out or exercise dissenter’s rights. Frederick’s estate opted to receive new Kohler shares rather than cash. Some of the non-family exercised dissenter’s rights and eventually settled for differing amounts up to $135,000 per share, including settlement of claims for breach of fiduciary duty. The reorganization qualified as tax-free under the Internal Revenue Code, and was finalized on May 11, 1998, between the date of Frederic Kohler’s death and the alternative valuation date.

In this case, the IRS argued that the stock to be valued should be the pre-reorganization stock or, alternatively, that if the reorganization stock was used then the transfer restrictions should be disregarded. The Tax Court rejected both arguments. The Tax Court noted that the Code allows the executor of an estate to value estate property either on the date of the decedent’s death, or up to six months later (the alternate valuation date). Property disposed of within six months of the decedent’s death is to be valued as of the disposition. Stock exchanged for new stock of the same corporation in a tax-free reorganization, such as the Kohler stock in this case, is not treated as “disposed of” for the purposes of the IRC. Therefore, the Court found that the executor could elect to value the (new) Kohler stock as of the alternate valuation date.
Both sides used expert witnesses to establish the fair market value of the Kohler stock. At trial, the Tax Court granted the taxpayer’s motion to shift the burden of proof to the IRS after the taxpayer produced credible evidence to support its position. The Tax Court expressed “grave concerns” about the valuation presented by the IRS’s expert, Dr. Scott Hakala. The court questioned his credentials, noting that he was not a member of the American Society of Appraisers (ASA), and that he had not submitted his report with the customary certification required by Uniform Standards of Professional Appraisal Practice (USPAP). The Court also took issue with his “limited” background research into the company, consisting of less than three hours of meetings with Kohler management.

Dr. Hakala used two of the three usual approaches to valuation---the income approach and the market approach. All parties and the court considered the cost approach inappropriate since this was a going concern and not an asset-intensive business. For his income approach, Dr. Hakala used only a discounted cash flow analysis, not a dividend-based analysis. In his DCF analysis, he made his own assumptions about expenses instead of using the expenses in company projections. He did two DCF calculations, one based on the company’s Operations Plan (which he weighted 80%) and one based on the company’s Management Plan (which he weighted 20%). For his market approach, Dr. Hakala used the guideline company method (which he weighted 80%), and the transactions method (which he weighted 20%). He arrived at a valuation of $156 million for the value of the stock held by the estate.

The Tax Court criticized Dr. Hakala’s findings, noting particularly his decision to weight the Operations Plan at 80%, even though Kohler had emphasized that the Operations Plan was strictly a best-case scenario. Also significant was the failure to employ a dividend-based method in his income approach, even though dividends had been consistent for almost a century and were the primary vehicle for return on the stock. Ultimately, the Court placed “no weight on Dr. Hakala’s report as evidence of the value of the Kohler stock.”

The taxpayer retained Willamette Management Associates to value the Kohler stock. WMA has periodically appraised the company in the past. The appraisal was done in part by Robert Schweihs, who had written at least 50 articles on valuing a business, including serving as co-author of the book “Valuing a Business.” Mr. Schweihs was very familiar with Kohler prior to this assignment. WMA also used the income approach and the market approach. For the income approach, WMA used the DCF method, the discounted dividend method and the dividend capitalization method. For the market approach, WMA used the capital market (guideline company) method but not the transaction method. Unlike Dr. Hakala, he felt there were no other transactions of sufficient similarity to apply the transaction method.

WMA applied a 45% lack of marketability discount to the values determined with the DCF method and the capital market method, and a 10% lack of marketability discount to the values reached with the discounted dividend method and the capitalization of dividends method. WMA also used a 26% discount for lack of control with the value determined under the DCF method. WMA weighted the DCF method and the capital market method each 20%, with 30% to each of the dividend methods. This resulted in a valuation of $47,010,000 for the Kohler shares owned by the estate on the alternative valuation date.

The estate also presented testimony from Roger Grabowski, a managing director of Duff & Phelps. Mr. Grabowski had taught finance and valuation at Loyola University, and taught classes for the ASA. He spent 31/2 days interviewing 12 employees of the company. His valuation analysis was much more like that of WMA than that of Dr. Hakala, although he used different discounts and weights. His fair market valuation for the stock was $63,385,000.

The Tax Court was far more impressed with the opinions of the estate’s experts, according “significant weight to their reports.” The Court noted with approval that, because of their highly-developed familiarity with the company, they used correct projections to value the company and were aware of the importance of dividends to Kohler shareholders, making the dividend methods essential components of their analyses. The Tax Court adopted the WMA fair market value of $47,010,000, rejecting the entire tax deficiency assessed by the IRS. The Court also found that since the estate had correctly reported its value on the estate return, there could be no accuracy-related penalty.



Judge(s): tbd
Plaintiff Lawyer(s) Plaintiff Law Firm(s)
Peter Carter Dorsey & Whitney LLP
Peter S. Hendrixson Dorsey & Whitney LLP
Nathan E. Honson Dorsey & Whitney LLP
Phillip H. Martin Dorsey & Whitney LLP
John Rock Dorsey & Whitney LLP
Mary J. Streitz Dorsey & Whitney LLP

Defendant Lawyer(s) Defendant Law Firm(s)
George Bezold
J. Anthony Hoefer



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because he thought the aspirational operations plan was a more commissioner, t.c. memo. 2003-176. the taxable estate is the draw appropriate inferences. commissioner v. scottish am. inv. comparable companies that have recently been acquired are cash return on his or her investment. under the market approach, 1998, the date of the reorganization, but on the alternate kohler has always been a privately held family business. the industries in which kohler operates. (1944); helvering v. natl. grocery co., 304 u.s. 282, 294 (1938). prices, up to $135,000 per share in some cases. a portion of the to unload them at the first sign of unprofitability. a public questions and ensure that kohler was ready for future generations t.c. memo. 2006-152 that his original report submitted to the court before trial -13- appraiser with the asa in business valuation. he has taught dr. hakala made a last minute correction to the value he substantiated items, maintained required records, and fully history relied on by the district court in flanders because the shareholders would continue to own all of the shares of kohler. 7491(a)(2)(a) and (b).6 internal revenue service restructuring and reform act of 1998, 20 percent of kohler's revenues and profits annually in the years -4- consideration received will be approximately equal to the fair was appointed personal representative of the estate. memo. 2002-181, affd. 67 fed. appx. 248 (5th cir. 2003); pham v. like kohler, and that this premium could not be quantified.13 pub. l. 105-206, sec. 3001(a), 112 stat. 726. -27- did not use the expenses in the projections kohler provided him. conclusions of petitioners' experts, mr. schweihs and mr. credible evidence in support of its position. see sec. met his burden of proof. accordingly, we find the value of the ii. choice of valuation date and stock to be valued valuation date instead. see sec. 2032(a)(2); sec. 20.2032- a. the estate's cooperation with respondent the gift tax cases are not liable for the accuracy-related grandchildren of the founder of kohler, john michael kohler. dividend method was the most appropriate method because it million. we explained to the parties after respondent rested his return. section 2032(a). sec. 20.2032-1(c)(1), estate tax regs. no ambiguity here and thus no need to consider legislative and jeffrey cheney, who is the chief financial officer and vice states, 89 aftr 2d 1279, 2002-1 ustc par. 60,435 (e.d. wis. prices for shares of kohler stock were listed in the national and natalie (the general counsel). mr. grabowski also reviewed determined that the transactions included a premium for being once dr. hakala determined the values under the transaction directly reflected the value of the shares. mr. schweihs also stipulation of facts containing nearly 200 exhibits, which they we have found the value of the stock held by the estate is approach to value the kohler stock. under the income approach, such a late date. we accordingly shall not consider respondent's component of their analyses. indeed, herbert was aware of excesses creeping into the market commissioner v. scottish am. inv. co., 323 u.s. 119, 123-125 of the family to take control when the time came. the family and kohler in 1981, she worked at quarles & brady, a wisconsin law that shares of the corporation to be valued would sell for if the companies since 1974, first with s&p corporate value consulting b. the estate's introduction of credible evidence value the kohler stock. discounted dividend method and the dividend capitalization this formula and the value we concluded in the estate tax case, -42- the time of death. sec. 2031. in most instances, the value of and accordingly respondent has failed to meet his burden of characterized as involving taxpayers with a pattern of court's judgment. id. (citing helvering v. natl. grocery co., commissioner, t.c. memo. 2005-131. estate of jelke involved a elects the alternate valuation date. sec. 20.2032-1(d), estate date. respondent determined that the kohler stock the estate business appraisers. he has authored several books, including find transactions in companies sufficiently similar to kohler we are asked to determine the fair market value of the decedent's death. sec. 2032(a)(2). the election to use the facilitate estate planning for kohler family members and allow produced the requested documents. testimony that dr. hakala did not understand kohler's business. to the summons once the estate lost its motion to quash the cooperated with the commissioner's reasonable requests. sec. purchase option. see flanders v. united states, 347 f. supp. 95 ready market exists for a shareholder wishing to sell. of a privately held company operating in numerous market segments correct projection to value the business, the realistic and the guideline company method examines certain financial difficult to implement and maintain if kohler were public. privately held company appraisal foundation. dr. hakala's report also was not submitted certain nonfamily shareholders exercised their dissenters' gross estate less allowable deductions. sec. 2051. the gross stock in march 1998. the kohler family and management wanted to natalie selected wma for several reasons. wma had periodically -5- expert report the estate submitted as of frederic's date of death respondent urges us to revisit the question of the burden of reorganization kohler stock or the pre-reorganization kohler particular facts of each case. estate of andrews v. historical and expected future performance. valuation conclusion as to each segment of the business based on privately held companies like kohler. each valuation provided alternate valuation date. id. 3. analysis in addition, dr. hakala did not use a dividend-based method disposition) between the date of decedent's death and the return. we ascribe great weight to both of these valuations and the trier of fact must weigh all relevant evidence of value and divisions. the kitchen and bath division is the largest of the of proof to respondent, because we found that the estate section 6662(a). moreover, the estate introduced the testimony of several evidence, giving due regard to our observation at trial of the appraisal to its return indicating the stock was worth in wisconsin circuit court, sheboygan county, wisconsin. the company's performance and updated the management plan early twenties. frederic was not involved in management and was overvalued the estate's kohler stock by $11 million, or more than related penalties under section 6662(a)2 appraiser has no bias regarding the parties, no other persons in forecasting the cash flow for the dcf method, dr. hakala reorganization provisions. continue paying dividends even if it meant not reinvesting the 90 $50.115 million. natalie attached the appraisal reports to the natalie a. black 371,058.85 74,211.77 months after the decedent's death is valued as of the date of the guideline company method. mr. schweihs did not use the trial that respondent has the burden of proof. directors, or amend the articles of incorporation. commissioner, t.c. memo. 2002-101. no case that respondent cites lack of control was warranted only in considering the value of the operations plan and one using revenues from the management weeks before the cancer would have become extremely painful for when he was in his late teens and early twenties. herbert has a higher price for their shares. some of these shareholders also commissioner of internal revenue, respondent and the capital structure was different. mr. schweihs is a managing director of wma, has been this case is consolidated for briefing, trial, and opinion phelps. he is a member of the asa and is an accredited senior mr. schweihs applied a 45-percent lack of marketability 25-percent adjustment, he considered factors such as the kohler b. expert opinions that a type a merger will be tax free is a representation that to be received on the stock. some dividend-based methods also motion to amend his answer due to the substantial disadvantage -16- accordingly also find that the estate is not liable for the -17- determined the fair market value of the kohler stock the estate comparable transactions that could be used in the transaction mr. schweihs also determined that the prices paid in the supra. we may find evidence of valuation provided by one of the 11 accredited as a senior appraiser in business valuation by the including 1998. penalties and must come forward with evidence that it is reorganization would best meet the company's needs. approach to value the estate's kohler stock. under the income transaction method.11 there is generally a 20-percent penalty on any portion of an petitioners herbert v. kohler, jr. (herbert) and ruth now ripe for decision, we reject both respondent's arguments. petition. benefited the community at large, and likely would have been more -7- method. he recognized that the dividend methods were important the determination of fair market value is a question of fact, and natalie black (natalie), who was close to frederic personally, to make this argument. estate tax regs. kohler also developed an operations plan, which was a claims for breach of fiduciary duty. documents respondent requested, including the documents subject dividends. in recessionary times, kohler's policy was to there is an exception for tax-free reorganizations under family and management wanted to resolve control and ownership its stock. kohler stock has never traded on any organized investment might decrease earnings and depress the stock price. depended on their dividends for their well-being. receiving owned was worth $144.5 million on the alternate valuation date. should be valued without regard to the transfer restrictions and customary uspap certification, which assures readers that the models in a manner inconsistent with the reality of the business. the estate, which owned 12.85 percent of the voting stock well. (continued...) 2002). the court denied the motion to quash and the estate then like kohler. we accordingly give significant weight to their concluded that the value of the stock was higher on the date of -32- kohler employees. worth more than the values of its assets. of the kohler stock held by the estate as of september 4, 1998, -25- company method was more reliable, and there were not very many later generations a vote on company matters. in addition, the predictive value of the operating plan versus the management plan under the market approach, dr. hakala used two methods. alternate valuation date, or, alternatively, that we should the stipulation of facts and the accompanying exhibits are estate's stock to be the amount the estate reported on its mr. schweihs used the capital market method, also known as the (1985); estate of deputy v. commissioner, supra. respondent's expert found. at trial, we granted the estate's motion to shift the burden t.c. 938, 940 (1982); estate of noble v. commissioner, t.c. memo. history. the terms "distributed, sold, exchanged, or otherwise because of the strict requirements in the corporate methods and conclusions. we continue to have these concerns. all shareholders. if the additional dividend is not declared and requested numerous documents, many of which the estate produced. initial public offering. the closeness of the values determined decedent's death is valued as of the date 6 months after the his report. 9 reorganization on its own. the estate opted to receive new 3. respondent's argument to disregard transfer received in exchange). as the parties stipulated that the natalie is the general counsel of kohler. before joining 7 stock it owned was worth $47,009,625 on the alternate valuation sec. 2032(a). if an executor chooses this option, property voting common stock (which had one vote per share), 244 shares of moreover, we are convinced from his report and trial after dr. hakala had weighted the values he found under each hospitality division generated about 4 percent of kohler's of the property in frederic's gross estate as of the alternate made a substantial gift tax valuation understatement. see sec. throughout the year to reflect kohler's actual results. dr. hakala used only one method under the income approach, scott hakala. dr. hakala concluded that the fair market value of both parties also submitted expert reports providing indicators of value where dividends represent the best, if not lack of marketability and lack of control to determine that the company. management did not view dealing with stock analysts, frederic c. kohler (the estate) on the alternate valuation date. on the alternate valuation date was $47,009,625. respondent concluded a 25-percent discount was appropriate. able to be a shareholder in a prominent, privately held company author of "valuing a business." natalie gave mr. schweihs all ruth deyoung kohler 393,367.41 78,673.48 in accordance with the uniform standards of professional petitioners' federal estate and gift taxes for 1998 and accuracy- transaction method, unlike dr. hakala, because he was unable to personal effects, and the kohler stock. natalie, as personal mr. schweihs weighted the dcf method and the capital market liable for the accuracy-related penalty. the parties have argues that the fair market value of the stock on the alternate the hospitality group and in considering the price paid to -9- nonvoting common stock (which carried the right to an additional cir. 2004). -29- kohler generally used two types of projections to plan for kohler initially retained the dorsey and whitney law firm to realities of the business and management's best judgment of where 13 of $15 per share for each of 20 years proof. in contrast, both of the estate's experts provided the interiors division, the third largest, manufactures and deyoung kohler, and natalie a. black resided in kohler, rather than a compromise between the two. see buffalo tool & die -15- the gross estate is the fair market value of the included facts. see id.; estate of deputy v. commissioner, t.c. memo. methodologies, keeping in mind that respondent has the burden of transfer restrictions and a purchase option to ensure that family no. 4649-03. valuation date was $144.5 million, a difference of approximately the estate's stock on the alternate valuation date was $156 lead to unfavorable results for the company. for example, kohler mr. grabowski then adjusted the value he determined for the testimony is incredible. estate of hall v. commissioner, 92 t.c. appropriate to impose the penalty. see sec. 7491(c); higbee v. valuation date and is very familiar with the company. for this were unreliable. we are concerned by dr. hakala's choice to mr. schweihs also did not rely on the asset-based approach we also note that the evidence of the pre-reorganization likely scenario. settlement price was attributable to settling the dissenters' for the various constituencies the company touched, including eventual public offering was not likely with kohler and therefore series a nonvoting common stock, and 5 shares of series b valuing a business (4th ed. 2001). kroupa, judge: respondent determined deficiencies in co., 323 u.s. 119 (1944); helvering v. natl. grocery co., 304 all of the new shares of kohler stock were subject to he decided to make his own assumptions about expenses. dr. stock in his analysis. we shall briefly describe dr. hakala's since its founding in 1887. many kohler family members are the conclusions in the report were developed in conformity with deficiency notice are presumed correct, and the taxpayer has the the kitchen and bath business segment. which considered many different factors and ascribed different business and the stock. estate of jelke v. commissioner, supra; estate of deputy v. elects, as natalie did here. sec. 20.2031-1(b), estate tax regs. we are also asked to decide whether each petitioner is second largest division is power systems, which generated 15 to 1(c)(1), estate tax regs. old. he never married, had no children, and was under a on kohler stock due to the privately held nature of the company. (frederic), are the children of herbert v. kohler, sr. and the take into account the probability of possible liquidity events because the estate filed a motion to quash a summons due to v. accuracy-related penalty plan model only 20 percent under the income approach, despite the companies and compares that financial information with financial hakala applied these assumptions without first discussing them of death and the alternate valuation date that reduced the value the expense structure in the company's projections was wrong and in fact, the regulation does not discuss tax-free the reorganization qualified as a tax-free reorganization under conclusions of mr. schweihs and mr. grabowski. both are -41- we are asked to determine the fair market value of a portion by considering the burden of proof. capital market method, and a 10-percent lack of marketability stock and have provided us with the formula they intend to use to to reflect the foregoing and the concessions of the parties, the only, opportunity for a minority shareholder to receive a -14- frederic c. kohler, deceased, natalie a. black, personal sells small gas engines that power lawn, garden, and turf based approach, in his view, generally is not a reliable requirements of section 7491(a), and we stand by our ruling at witnesses for both parties and considering their testimony and date of frederic's death, 6 months earlier, and determined the before the reorganization, could not have blocked or approved the change in form or to disregard the exchange.7 the relative portion of kohler's business that the segment applied valuation multiples to these entities to estimate the method, and the adjusted discounted dividend method. mr. the transfer of the taxable estate on the decedent's death company that periodically and historically has paid large kohler was closely held and the number of shares of stock the b. stock to be valued -37- president of kohler. the parties also provided the court with a projection of what could theoretically be achieved in a perfect kohler has paid dividends to its shareholders at least operates hospitality and real estate businesses. kohler has been valuation understatement. sec. 6662(a) and (b)(5). there is a the management plan forecasted realistic, achievable targets. thoughtful valuations reflecting the true nature of the kohler associates (wma) to value the kohler stock the estate owned. approach, he averaged the approaches and considered whether a rent accrues and is paid. it is those property interests that never a director or officer of kohler. transactions of kohler stock in determining the value. he accordingly, based on our review of all of the valuation expert's valuation of the estate's stock. respondent failed to companies that eventually went public and therefore their shares all section references are to the internal revenue code, property is reported at a value less than 25 percent of the value proof issue was irrelevant when essentially no facts are in in general, the commissioner's determinations in the was cooperative throughout the audit and produced most of the company sells all of the same types of products. we are asked to decide the fair market value of stock of the experts, he also did not consider any actual sales of kohler -26- in addition to the dividends periodically declared and paid to incorporated by this reference. herbert v. kohler, jr., ruth company. herbert realized that public companies were much more respondent issued a deficiency notice to the estate that certain documents from the estate. representative of the estate, was concerned about the relevancy correct. he also reconciled his conclusion to prior sales of we now consider the appropriate valuation date and the filed a motion to quash the summons. natalie, as personal -31- private company information. see estate of kohler v. united petition. respondent also determined deficiencies in gift taxes not producing this information until a court required it. this respondent's expert's conclusions. respondent has therefore not decided to invent his own for his income approach analysis. he kohler is a well-known international manufacturer of outside shareholders, however, held about 4 percent of the kohler proof to show that the value the estate reported on its return is petitioners. the dcf method discounts to present value the expected ignore the transfer restrictions and the purchase option in outstanding shares of kohler stock. the estate owned a greater commissioner, supra. on this record, which includes such to address changes in value caused by market forces. respondent petitioner deficiency penalty information of the corporation to be valued to project the price receive. the adjusted discounted dividend method also reflected unavailable or inconclusive, the value of closely held stock voluminous evidence, we find that the estate introduced credible, burden of proving that the commissioner's determinations are in because he considered it the most accurate estimate of the future stock received in a tax-free reorganization should be disregarded appraisal practice (uspap). dr. hakala did not provide the to our conclusions. discount for lack of marketability should be applied. he belief that some of the documents respondent sought were representative, docket no. 4646-03, and natalie a. black, docket united states tax court after the valuation date. estate of andrews v. commissioner, 79 weight the operations plan model 80 percent and the management 3 international markets at the time and economists' predictions of this mission. kohler's diverse product mix is unique. no other of proof. id. considering all of the evidence, we continue to find dr. hakala's shall be determined by reference to an agreed formula that takes findings of fact accordingly, we find that the estate has satisfied the commissioner, supra at 940-941. mr. grabowski used the income approach and the market obtained in the transaction, rather than the market price. property. the value the estate reported on its return. we therefore need belie this argument. weight the guideline company approach 80 percent and the decisions will be entered flanders involved restrictions implemented between the date 5 appraiser who handled the valuation of the estate's stock, and reorganization stock must generally equal the fair market value involving acquisitions of businesses with control premiums, and representative 53,650,374.00 10,723,941.40 the plans 304 u.s. at 295 and silverman v. commissioner, 538 f.2d 927, 933 weight on dr. hakala's report as evidence of the value of the argues that we should value the pre-reorganization stock on the -23- -2- its rights. once the court denied the estate's motion to quash publicly traded stock, the value of unlisted stock is best grabowski, each of whom we find thoughtful and credible. we give cooperated with respondent's reasonable requests. the regulations specify that "otherwise disposed of" does not periodic dividends, and both made dividend methods an essential kohler, deceased, natalie a. management intended the management plan to be a good predictor of neither under any compulsion to buy or sell and both having we shall now examine the experts' opinions and besides those listed provided professional assistance, and that percentage of kohler after the reorganization than before because on the topic. he has appraised businesses since the early 1980s, 10 fact witnesses, in addition to the estate's two experts, to interests, such as dividends and leased property, which may had a long history of faith in its investments and did not seek penalty. the other side's proposed findings of fact. cf. estate of deputy with respondent. -12- each method and ultimately decided that the adjusted discounted the kohler company and the kohler family experts' appraisals are more thorough and consistent with lack of customary certification of dr. hakala's report and that fair market value is the price at which property would moreover, we find the regulation consistent with the legislative and knew the company's international investments were not doing such as initial public offerings. legislative history describes the general purpose of the statute, as previously stated, we give no weight to respondent's j. anthony hoefer and george bezold, for respondent. conclusions on other points. brewer quality homes, inc. v. associates, customers, suppliers, and employees. this view was respect to a factual issue relevant to a taxpayer's liability for kohler, dr. hakala found transactions he thought were comparable we found after the estate's case in chief that respondent 11 -38- co-authoring "valuing a business" with shannon pratt and robert reject expert testimony and will reject expert testimony where marketability discount because the studies involved only knowledge of relevant facts. sec. 20.2031-1(b), estate tax regs. 2. dr. hakala's valuation processes and methodologies comprised. mr. grabowski did not use the cost approach because this provision does not support respondent's argument that -43- and the operations plan, and each had different uses. the shannon p. pratt, robert f. reilly & robert p. schweihs, renewed arguments that the stock should be valued on the date of tax under certain circumstances, however, if the taxpayer of the estate's kohler stock as of the alternate valuation date, gift tax cases were liable for the accuracy-related penalty under that the proper valuation date was the date of frederic's death, or proprietary business information. in contrast, these cases accuracy-related irrelevant, sealed, or contained sensitive kohler business the deadline for motions with respect to the pleadings to assert in the following although dr. hakala has a doctorate from the university of and including 1998. the smallest division is hospitality, which the operations plan and management plan, however, and also data and all relevant factors that would affect fair market (...continued) assist in the reorganization in early 1996. the reorganization did not discuss his fabricated expense structure with management hakala argued first that the dcf analysis made other income domiciled in wisconsin when he died, and his estate was probated we are impressed by the valuation methodologies and rather than seeking to maximize its earnings at every under the market approach, mr. grabowski used the guideline cumulative cash dividend4 section 368(a). stock exchanged for stock of the same -40- of the pre-reorganization stock for the reorganization to be tax 6 case to the value of kohler stock the estate owned. the value of the company and its business already. natalie was also impressed the stock we value in this case. for example, the pre- determined by considering actual sales at arm's length in the kohler's revenues and profits annually in the years leading up to experts' value conclusions with respect to the estate's stock on dr. hakala's background research on kohler was limited. he nathan e. honson, peter w. carter, and john rock, for estate's return was incorrect. after carefully reviewing and that our findings result in a significant victory for one side, with that of ruth deyoung kohler, docket no. 4622-03, estate of selected and the financial information is compared to the price (1933). the burden of proof may shift to the commissioner with the alternate valuation date differed by more than $100 million, determined the stock was worth $47,009,625. the parties do not with new classes of shares that had various voting rights and (prerequisite to advance ruling that a type e recapitalization was $47,009,625. management. securities and exchange commission and has never publicly sold was $47.010 million.5 u.s. 282 (1938). dispute, and we declined to determine which party had the burden kohler. they were also aware that the primary return a we have sustained the estate's valuation of its kohler stock, we sec. 6662(a) not the specific meaning of "otherwise disposed of" in the claimed that kohler management breached their fiduciary duties. the summons, the estate provided the documents respondent frederic, who is herbert and ruth's brother, suffered from 2 private. the shareholder could not simply sell the shares herbert and natalie, viewed themselves as stewards, responsible and prejudice to petitioners if respondent amended his answer at of land by 88 percent. the district court held that these leading up to and including 1998. power systems manufactures and like the estate's experts, he used the guideline company method, report and testified for the estate. he has been valuing docket nos. 4621-03, 4622-03, filed july 25, 2006. summons. see estate of kohler v. united states, supra. simply reorganization was tax free, we question why respondent continues 4646-03, 4649-03. valuations of kohler stock in the several years before the firm. -10- plan. he weighted the results he derived from these two dcf c. respondent's expert witness: dr. scott hakala of cbiz accordingly, we shall value the post-reorganization stock on the estate reported that its kohler stock was worth does not require a finding that the estate failed to cooperate the witness' opinion of value is so exaggerated that the -39- to the value he determined under the dcf method. cannot be applied with mathematical precision, and the weight calculate the valuation of each gift. based on our review of are liable for the accuracy-related penalty. the estate argues were listed in the pink sheets from december 1993 through march estate tax return the estate filed. natalie elected to value all section 368(a). intending to transact with kohler, such as insurance companies valuing the post-reorganization stock. although these issues are certain sales of kohler stock, transactions in the industry not a minor mistake. when we doubt the judgment of an expert kohler co. (kohler or the company) owned by the estate of while the estate's experts did not find disregard the tax-free reorganization when valuing the property. including 1998. kitchen and bath is a full line plumbing support its position. these witnesses included herbert, natalie, kohler stock held by the estate on the date frederic died was (n.d. cal. 1972). we disagree. was finally completed and became effective on may 11, 1998. the (...continued) argues that we should reach a similar result here. we note that the fair market value of the post- partial summary judgment regarding the stock to be valued. he significant weight to their reports, which lend further support whenever he or she wished and could not count on appreciation in i. burden of proof that opinion testimony is not credible evidence to support of the shares to be surrendered will equal the shares to be wma's appraisal report determined that the fair market value the parties have stipulated that the final value of the he spent only 2-1/2 hours meeting with management. he decided met with kohler management just once, for about 2-1/2 hours. he approximately $100 million apart. we begin our analysis of the sister, was never an employee, director, or officer of kohler and plumbing products, cabinetry, tile, home furnishings, generators, restrictions and purchase option noncooperation with the commissioner and failure to comply with its business. these projections were called the management plan iv. valuation of the estate's stock respondent then sought to amend respondent's answer after we are not obligated to pay any regard to an expert opinion capital gain liability. id. we held there that the burden of published benchmark data. of the information respondent requested and sought to protect the gift tax return at a value 50 percent or less than the value (...continued) including plumbing fixture businesses and closely held companies. proof now, arguing that the estate did not cooperate with dr. hakala stated that the the information he requested in connection with his appraisal. value for the different classes of kohler stock in each case future income of the corporation to generate a value for the determined and found that they all resulted in values fairly and the more aspirational operations plan based model 80 percent either accept the $52,700 per old share cash out price or to the reorganization explain this $375 discrepancy. iii. valuation of kohler stock the estate owned commissioner, 116 t.c. 438, 446-447 (2001). dividend methods because, in his view, the dividend method more annually since about 1900. kohler's stated policy was to resulted in an $11 million overvaluation of the kohler stock in appraised the company for various purposes in the past and knew periodic dividends were the primary means of obtaining a return dissenting shareholders in the litigation) is not helpful because section 2032 allows the executor of an estate to choose to considered industry information. in the estate even if they change in form (such as in a for herbert, natalie, and ruth, and each also filed a timely is recognizable. sec. 20.2032-1(c)(1), estate tax regs. corporation to be valued were publicly traded. the transaction convinced that this type of dependence on outside forces could worth $156 million on the alternate valuation date. introduce any evidence or present any arguments to persuade us unexpectedly of a heart attack on march 4, 1998, at age 54, only respect to decedent's property. sec. 2032(c). sec. 7.01(1), 1986-2 c.b. 722 (prerequisite to advance ruling exist as of the date of death that are valued if the executor $100 million from the value the estate reported. we shall begin 10 include transactions under section 368(a) where no gain or loss the fair market value of the acquirer stock and other and procedure, unless otherwise indicated. automatic transfer switches and switchgear. rotating through the manufacturing divisions during the summers the nonfamily shareholders had been cashed out. the block of accordingly, the kohler stock is not treated as disposed of on him. when he died, frederic owned 975 shares of kohler common and geographical regions, which is a question of fact. see contingencies or unforeseen events would occur. the operations business and used valuation methods considered reliable for regulation addresses the rules for certain types of property respondent renews two arguments he made in his motion for underlying facts. -6- with anyone at kohler. opportunity, several members of kohler management, including of kohler family members held most of the shares of kohler stock. the parties have narrowed the valuation questions in this transactions were not justified by analyzing the company's disagreement regarding a finite legal conclusion, whether a mr. grabowski was another expert who prepared an appraisal that the value reported on the estate's tax return was incorrect, weights to each of the dividend methods. he concluded that the distributed, exchanged, sold, or otherwise disposed of under (continued...) another advantage of being a privately owned company that mr. schweihs also did not account for prior sale case that we had grave concerns about dr. hakala's valuation dr. hakala used two of the three traditional approaches to to follow the opinion of any expert if it is contrary to the both motions then because the issue was premature. close to each other. he assessed the strengths and weaknesses of interviewed 12 employees, spending considerable time with 6 of kohler ultimately settled with these shareholders for varying value. rev. rul. 59-60, 1959-1 c.b. 237. these factors include under the income approach, although the record reflects that valuation date of september 4, 1998, and reported the value of value the estate's property at a time after the date of death. 1. dr. hakala's background and certifications respondent cites several cases where we did not shift the corporation in a tax-free reorganization is not treated as 7491(a)(1). respondent points out that we have previously held for a brief period as an inspector in the enamel shop in his dissenting shareholders in the reorganization. in making the kohler stock the estate held on the alternate valuation date to each other's proposed findings and positions. where there was adequate information available. gifts will be governed by our ruling on the value of the estate's unlike the cited cases, the estate had legitimate concerns studies did not give the full picture of the appropriate mr. schweihs used the income approach and the market respondent's reasonable requests because the estate filed a argument relies on section 20.2032-1(d), estate tax regs. this and his core work is valuing businesses and business interests, -24- following the reorganization). nonfamily shareholders could not we disagree. based on our review of the record and them, including herbert (the president and chairman of the board) outside probing, and pressure to produce earnings and raise the herbert v. kohler, jr., et al.,1 the company would be. the management plan was given to outsiders the expert reports, we conclude that the fair market value of the alternate valuation date may only be made if it has the effect of 13 given to each factor must be considered in light of the information regarding the company and interview kohler valuation date under section 2032 if the personal representative method. reflected the actual cash flows a shareholder could expect to -8- use of the income approach and the market approach. management considered various options and decided a we therefore find no authority to treat such an exchange as a kohler stock the estate held and whether any of the petitioners because kohler is a going concern operating company. an asset- 3. analysis into account the value of the kohler stock we determine. companies in each market segment in which kohler operated and factual witnesses, substantiated items, maintained records, and estate of frederic c. respondent issued a summons to the estate to obtain certain chiu v. commissioner, supra; estate of deputy v. commissioner, we have several significant concerns about the reliability kohler shares in the reorganization rather than accept cash. rather than the alternate valuation date. we denied respondent's we look to legislative history when statutory language is settings, and he has valued several businesses similar to kohler, moreover, the voluminous exhibits that are part of the record discount to the values he determined under the discounted approach, mr. schweihs used not only the dcf method, but also the and banks. kohler also used the management plan internally for transactions (including the $135,000 price received by the rights in the reorganization and litigated with kohler to achieve error. see rule 142(a); welch v. helvering, 290 u.s. 111, 115 -28- mr. grabowski used the dcf method, the discounted dividend 31, 1998. characteristics of the stock to be valued. opinion a. choice of valuation date valuation was based on an appraisal report prepared by richard incorrect. commissioner, supra at 940; sec. 20.2031-2(f), estate tax regs.; -20- see supra note 3 for a discussion of a minor inconsistency the date of the reorganization and is not valued as of may 11, a meaningful issue, rather than simply an academic one. cf. memorandum findings of fact and opinion we find that the estate's experts have provided thoughtful, respondent also argues that the estate has not produced by the other methods acted as a check that this value was reference to the value of the kohler stock we determine in the environment. the operations plan was built on the assumptions 8 valuations. was not involved in company management at any time. under the adjusted discounted dividend method to reflect that were sold periodically in private transactions. bid and ask underpayment attributable to a substantial estate or gift tax those for 1998 and 1997, reflecting the difficulties in the determined under the income approach at trial. his error this general purpose, reflecting the secretary's determination dividends as a return to its shareholders, recognizing that no reorganization replaced the old shares of kohler common stock year, with 7 to 10 percent of earnings paid to shareholders as keep the company as privately owned as possible and remove the the parties devote numerous pages in their briefs to objecting to 7 percent of the value he finally decided was correct. this is revenues and profits annually in the years leading up to and involves a taxpayer's legitimate attempt to protect confidential before the enactment of section 2032 that the section is intended standards. we also have already noted that dr. hakala admitted is not a tax protester or sham trust case. in fact, the estate all four divisions focus on maintaining the standard of and all rule references are to the tax court rules of practice the estate consisted of primarily cash, some securities and indicator of value for going concern companies. issue in the related gift tax cases shall be calculated by return, $47,009,625. new information or unforeseen events. commencing after july 22, 1998, the date of enactment of the 8 dispute resolution. mr. schweihs had periodically performed paying capacity, and other factors. estate of andrews v. 1 that lacks credibility. estate of hall v. commissioner, supra; a similar analysis to value the pre-reorganization shares on the -33- estate owned. mr. grabowski settled on a 35-percent discount for experts' reports after first discussing the law on valuing accordingly, kohler has never registered its stock with the -18- -35- method each 20 percent in his final analysis, and gave 30 percent 2032(a)(1). property that has not been distributed, sold, president since 1974. ruth, who is herbert and frederic's -36- performance of the company. pratt, who wrote a well-known book on appraisals entitled including advising acquirers and sellers, taxation matters, and -19- mr. grabowski spent 3-1/2 days at the company and bathtubs, faucets, cabinetry, tile and other products. the normal course of business within a reasonable time before or information and market prices of publicly traded comparable 2. mr. grabowski's valuation capital stock of the company. after his death, herbert's wife, value of each kohler market segment. he then weighted the quotations bureau's pink sheets. about 36 trades in kohler stock these transactions involve pre-reorganization stock, which is not schizophrenia and was adjudged incompetent when he was 21 years classes for the asa, and teaches a class on cost of capital. the weights for each, resulting in a wide range of proposed in early 1998, kohler family members, various charities further find that the estate's experts' reports created a range paid when due, the arrears accumulate. deficiency notices hakala determined that the kohler stock held by the estate was petitioners' arguments, we find that the estate had a good faith (continued...) factual evidence supporting its position. certified appraisers who spent sufficient time with the company and it was not a dividend-based method. he used only a approaches redundant and then stated that dividend-based methods and that the pre-reorganization stock should be valued instead. (continued...) a. fair market value companies similar to kohler. he found that the restricted stock dividend method and the capitalization of dividends method. he frederic's death, rather than the alternate valuation date. 312, 338 (1989); chiu v. commissioner, 84 t.c. 722, 734-735 valuations of the stock as of frederic's date of death. the when considering expert testimony, a court is not required requested. respondent has not argued that respondent's (continued...) kohler had a unique perspective on its role as a company. investigation was impaired by any lack of documentation. context of tax-free reorganizations. the meaning adopted in will be tax free is a representation that the fair market value exchanged, or otherwise disposed of within 6 months after the conclusions to be incredible. we therefore give no weight to minnesota and is a chartered financial analyst, he is not a there are enough facts at issue to make the burden of proof corporation's value should be reduced to reflect a built-in business valuation, the income approach and the market approach. some of the facts have been stipulated and are so found. significantly closer to the actual fair market value than about providing confidential and proprietary business information sec. 7491 is effective with respect to court proceedings admonitions of management that the operations plan projections phillip h. martin, peter s. hendrixson, mary j. streitz, reorganization stock did not have the same transfer restrictions parties to be much more credible than that of the other party, so determined that a slightly higher discount was appropriate. representative of the estate, retained willamette management decreasing the value of the gross estate and the sum of the shifting the burden of proof. see estate of jelke v. equipment, as well as small industrial equipment, generators, and plan was not generally updated throughout the year to incorporate dispute, it is irrelevant who has the burden to prove these the remote possibility that kohler would be sold or undergo an natalie knew he was well recognized in the field and was co- guardian of his person, and a trust company was frederic's -22- d. petitioners' expert witnesses of dr. hakala's report. these concerns lead us to place no valuation date was $63,385,000. adjusted discounted dividend method to reflect the discounts for herbert has worked at kohler almost all of his life, beginning by because respondent has the burden of proof, we shall first reported on its tax return. we also find that the estate's engines, transfer switches, and switchgear, and also owns and ignore any dividend-based method for kohler, a privately owned involve sham trusts, taxpayers who failed to file returns, publicly traded company method. he identified publicly traded kohler was a growing and profitable business that was likely ambiguous. blum v. stenson, 465 u.s. 886, 896 (1984). there is -30- that was possibly irrelevant and sought to protect the company by commissioner, t.c. memo. 2003-200, affd. 122 fed. appx. 88 (5th the kohler family intends to continue their business as a private method is similar to the guideline company method except that kohler operates its business through four separate reinvest at least 90 percent of its earnings in its business each and purchase option (thus affording purchasers more liquidity), kohler management was happy to avoid these types of concerns. and since september 2005, as a managing director with duff & businesses. mr. schweihs also gives two to four lectures a year held on the alternate valuation date was $144.5 million. this transaction method 20 percent. dr. hakala thought the guideline that the aggregate fair market value of the kohler stock it held quality and remaining on the leading edge of processing and the kohler stock on that date, $47,009,625, on the estate tax company might have less flexibility because a poorly performing determined that a 26-percent discount for lack of control applied kohler's business traditional appraisal methodologies for closely held companies valuations.8 dividend-based methods, in contrast to the dcf method, petitioners v. (...continued) free. see rev. rul. 74-269, 1974-1 c.b. 87; rev. proc. 86-42, motion to quash a summons that respondent had issued to obtain reorganization stock, rather than the post-reorganization stock, uspap. businesses rather than going concerns. like petitioners' to test whether it was realistic. dr. hakala also decided to both parties submitted expert reports providing valuations is subject to estate taxes. sec. 2001; estate of deputy v. 2. respondent's argument that we should value pre- generally value the stock based on the expected future dividends and has written between 50 and 100 articles on valuing -11- 1. mr. schweihs' valuation and then applied the ratios he found in those transactions to restrictions should not be considered in valuing the land, cost approach, which is best suited for asset-intensive tax obligations. tax regs. these date of death property interests remain included important to shareholders, and kohler recognized that. 6662(h). respondent has the burden of production regarding kohler stock owned by the estate on the alternate valuation date alternate valuation date was $47.010 million. mr. schweihs used management plan was a set of achievable targets and reflected the mr. grabowski then considered each of the values he had by wma's national reputation and wma's connection to shannon wma appraisal. dr. hakala created two dcf models, one using revenues from when asked why he did not use the dividend method at trial, dr. market price to provide a return. dividends were therefore undergo changes in form as dividends are declared and paid or outside shareholders. the family and management also wanted to discounted cash flow (dcf) method.9 gift tax valuation understatement where property is reported on a estate includes the value of all property owned by a decedent at resolved all other issues. products business that manufactures sinks, lavatories, toilets, during examination of the estate's return, respondent reilly,12 no nominal amount. penalty. respondent also determined that the petitioners in the method and the guideline company method, dr. hakala decided to deyoung kohler (ruth), as well as the late frederic c. kohler that tax-free reorganizations do not constitute dispositions sells home furnishings and was responsible for 6 percent of commissioner, t.c. memo. 2004-246; burnett v. commissioner, t.c. eventually determined by the court. sec. 6662(g)(1). where reorganizations. nothing in this regulation requires us to -34- introduced credible evidence including the testimony of several stock, which was approximately 12.85 percent of all outstanding "valuing a business." robert schweihs (mr. schweihs) was the wma his report was not prepared in accordance with all uspap we agree with his decision not to use the third approach, the has the burden to prove that the value of the kohler stock on the distribution, sale, exchange, or other disposition. sec. burden of proof to the commissioner where the commissioner was seriously ill during the months before he died. he died either slow growth or a decline in the united states economy. change hands between a willing buyer and a willing seller, forced to issue a summons to force compliance with an information was $50.115 million. (...continued) member of the american society of appraisers (asa) nor the and the impact of various economic indicators on the fortunes of accurate management plan, as a result of their understanding of four divisions and generated 70 to 75 percent of the company's taxpayers who had unreported income, and taxpayers who asserted family's stated intention to control the company long term, eventually became marketable. mr. grabowski concluded an and the purchase option. see sec. 2032(a); sec. 20.2032-1(c)(1), 2005-2. when arm's-length sales of unlisted stock are (2d cir. 1976), affg. t.c. memo. 1974-285). a court may adopt or the corporation's net worth, prospective earning power, dividend- disposed of" in section 2032 are explained in the regulations. market value of the target stock surrendered in the exchange); -21- property as of either the date of death, or the alternate used on brief to support their respective positions and to object respondent argues alternatively that the post-reorganization reorganization stock may of valumetrics advisors, inc. the estate timely filed a legitimate concerns about the relevancy of the information sought documents dealing with post-valuation date events and documents arising in connection with examinations by the commissioner he weighted the realistic management plan based model 20 percent valuation of kohler stock on the estate tax return dcf method was the most accurate method and was convinced of the mfg. co. v. commissioner, 74 t.c. 441, 452 (1980). 4 fair market value of the estate's kohler stock on the alternate see estate of deputy v. commissioner, supra. the we find that none of the petitioners in the gift tax cases has elect to accept new shares. instead, they were required to the alternate valuation date, including the transfer restrictions $47,009,625 on the alternate valuation date and attached an stock the estate owned was not sufficient by itself to vest the the parties stipulated that the value of the kohler stock at transactions in companies that had sufficient similarity to introduces credible evidence and establishes that he or she information and filed a motion to quash the summons to protect finance and valuation courses at loyola university, taught is $47,009,625, as reported on the estate's tax return.3 product design. kohler's stated mission is to improve the level stock price on a regular basis to be in the best interests of the grabowski used the management plan to perform these analyses 6662(g). fair market value of the kohler stock the estate owned on the guardian ad litem. frederic did not work at kohler other than revenues and profits annually in the years leading up to and beholden to stock analysts than private companies. herbert was capital planning, acquisition planning, and tax planning. mr. grabowski then made adjustments to the value determined rev. rul. 59-60, sec. 4.01, 1959-1 c.b. at 238. these factors black, personal advocate values on the alternate valuation date that are wisconsin, at the time they filed their petitions. frederic was eventually determined by the court, the penalty imposed under consider the conclusions of respondent's expert witness, dr. amounts: redundancy or unreliability of dividend-based methods.10 shareholder could expect from owning kohler stock was from accuracy-related penalty. we also find that the petitioners in for partial summary judgment regarding whether the post- lack of marketability. he determined this discount was correct relying on statements by a congressman on the floor of congress exercise dissenter's rights. fair market value of those shares on the date of frederic's death death than on the alternate valuation date. see sec. 2032(c). we now briefly describe the reports and valuation under rule 155. an additional cumulative cash dividend is a dividend paid witness on one point, we become reluctant to accept the expert's guardianship throughout his adult life. herbert served as we hold that the fair market value of the stock the estate owned established by kohler family members, and trusts for the benefit assignment in particular, he was required to review significant kohler stock to confirm the reasonableness of the analysis. including his adjustment for his $11 million error, dr. used a lower discount for lack of marketability under the of gracious living and to develop products and services that fit as of the alternate valuation date. we disagree. respondent's securities exchange. small lots, usually just one or two shares, request. amc trust v. commissioner, t.c. memo. 2005-180; rinn v. section 20.2032-1(c)(1), estate tax regs., is consistent with credible valuations strongly supporting the value the estate majority of his work is valuation services in nonlitigation $47,010,000. the parties stipulated that the appraisal report containing sensitive kohler business information. the estate discount to the values he determined under the dcf method and the mr. grabowski determined that a 25-percent adjustment for after the reorganization, the estate owned 14.45 percent of the not address whether the estate is liable for the accuracy-related respondent also argues that we should value the pre- the management plan projected earnings for 1999 to be below section 6662 is increased from 20 percent to 40 percent. sec. numerous documents and considered general economic conditions and 2003-176. here, however, the parties dispute several important shall be determined by considering all other available financial we agree that, where the underlying facts are not in -3- that each business unit would maximize its results and no percent. kohler management knew that the shareholders often property is a quintessential question of fact. the parties had the right to receive either $52,700 in cash or one share of frederic was diagnosed in 1997 with carcinoma and was before trial, petitioners and respondent each filed motions and management to understand the kohler business. they used the asa, and is a certified business appraiser of the institute of estate with the power to change management, change the board of but was the only one of the three experts who used the kohler stock the estate held. we have previously discussed the by considering studies of restricted stock and the stock of other dividends was the primary way a kohler shareholder could receive "distributed, sold, exchanged, or otherwise disposed of" within 6 7 did obtain financial information from the company including both herbert v. kohler, jr. $416,550.23 $83,310.05 been the chairman and chief executive of kohler since 1972 and estate tax case. the parties have also agreed that the per share the estate reported on the estate tax return that the kohler 1. general rules on valuation date because were only what could be created in a perfect environment while while listed prices normally establish fair market value of 12 stock should be considered in the valuation. the court denied rev. proc. 81-60, sec. 4.03(2)(d), 1981-2 c.b. 680, 682 typical tax-protester arguments. these cases can be v. commissioner, supra. for example, the parties dispute the dividend preferences. for each old share, family shareholders estate tax and the generation-skipping transfer tax imposed with persuasive support for the value the estate reported on its a private company, predominantly owned by the kohler family, owns and operates a resort, a spa, and several golf courses. the between the estate tax return, the parties' stipulations, and the wma also determined that the value of the a return on his or her investment because the company was

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