                       T.C. Memo. 2006-152



                     UNITED STATES TAX COURT



         HERBERT V. KOHLER, JR., ET AL.,1 Petitioners v.
          COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket Nos. 4621-03, 4622-03,     Filed July 25, 2006.
                 4646-03, 4649-03.



     Phillip H. Martin, Peter S. Hendrixson, Mary J. Streitz,

Nathan E. Honson, Peter W. Carter, and John Rock, for

petitioners.


     J. Anthony Hoefer and George Bezold, for respondent.




     1
      This case is consolidated for briefing, trial, and opinion
with that of Ruth DeYoung Kohler, docket No. 4622-03, Estate of
Frederic C. Kohler, Deceased, Natalie A. Black, Personal
Representative, docket No. 4646-03, and Natalie A. Black, docket
No. 4649-03.
                                -2-

             MEMORANDUM FINDINGS OF FACT AND OPINION


     KROUPA, Judge:   Respondent determined deficiencies in

petitioners’ Federal estate and gift taxes for 1998 and accuracy-

related penalties under section 6662(a)2 in the following

amounts:

                                                 Sec. 6662(a)
                                               Accuracy-Related
    Petitioner                  Deficiency         Penalty

Herbert V. Kohler, Jr.         $416,550.23       $83,310.05

Ruth DeYoung Kohler             393,367.41       78,673.48

Estate of Frederic C.
Kohler, Deceased, Natalie A.
Black, Personal
Representative               53,650,374.00    10,723,941.40

Natalie A. Black                371,058.85        74,211.77


We are asked to decide the fair market value of stock of the

Kohler Co. (Kohler or the company) owned by the estate of

Frederic C. Kohler (the estate) on the alternate valuation date.

The parties stipulated that the value of the Kohler stock at

issue in the related gift tax cases shall be calculated by

reference to the value of the Kohler stock we determine in the

estate tax case.   The parties have also agreed that the per share

value for the different classes of Kohler stock in each case



     2
      All section references are to the Internal Revenue Code,
and all Rule references are to the Tax Court Rules of Practice
and Procedure, unless otherwise indicated.
                                  -3-

shall be determined by reference to an agreed formula that takes

into account the value of the Kohler stock we determine.

     We are also asked to decide whether each petitioner is

liable for the accuracy-related penalty.     The parties have

resolved all other issues.

     The estate reported on the estate tax return that the Kohler

stock it owned was worth $47,009,625 on the alternate valuation

date.    Respondent determined that the Kohler stock the estate

owned was worth $144.5 million on the alternate valuation date.

We hold that the fair market value of the stock the estate owned

is $47,009,625, as reported on the estate’s tax return.3    Because

we have sustained the estate’s valuation of its Kohler stock, we

accordingly also find that the estate is not liable for the

accuracy-related penalty.    We also find that the petitioners in

the gift tax cases are not liable for the accuracy-related

penalty.

                          FINDINGS OF FACT

     Some of the facts have been stipulated and are so found.

The stipulation of facts and the accompanying exhibits are

incorporated by this reference.    Herbert V. Kohler, Jr., Ruth



     3
      The estate reported that its Kohler stock was worth
$47,009,625 on the alternate valuation date and attached an
appraisal to its return indicating the stock was worth
$47,010,000. The parties stipulated that the appraisal report
determined the stock was worth $47,009,625. The parties do not
explain this $375 discrepancy.
                                -4-

DeYoung Kohler, and Natalie A. Black resided in Kohler,

Wisconsin, at the time they filed their petitions.    Frederic was

domiciled in Wisconsin when he died, and his estate was probated

in Wisconsin Circuit Court, Sheboygan County, Wisconsin.

The Kohler Company and the Kohler Family

     Kohler is a well-known international manufacturer of

plumbing products, cabinetry, tile, home furnishings, generators,

engines, transfer switches, and switchgear, and also owns and

operates hospitality and real estate businesses.    Kohler has been

a private company, predominantly owned by the Kohler family,

since its founding in 1887.   Many Kohler family members are

Kohler employees.

     Petitioners Herbert V. Kohler, Jr. (Herbert) and Ruth

DeYoung Kohler (Ruth), as well as the late Frederic C. Kohler

(Frederic), are the children of Herbert V. Kohler, Sr. and the

grandchildren of the founder of Kohler, John Michael Kohler.

Herbert has worked at Kohler almost all of his life, beginning by

rotating through the manufacturing divisions during the summers

when he was in his late teens and early twenties.    Herbert has

been the chairman and chief executive of Kohler since 1972 and

president since 1974.   Ruth, who is Herbert and Frederic’s

sister, was never an employee, director, or officer of Kohler and

was not involved in company management at any time.
                                 -5-

       Frederic, who is Herbert and Ruth’s brother, suffered from

schizophrenia and was adjudged incompetent when he was 21 years

old.    He never married, had no children, and was under a

guardianship throughout his adult life.    Herbert served as

guardian of his person, and a trust company was Frederic’s

guardian ad litem.    Frederic did not work at Kohler other than

for a brief period as an inspector in the enamel shop in his

early twenties.    Frederic was not involved in management and was

never a director or officer of Kohler.

       Frederic was diagnosed in 1997 with carcinoma and was

seriously ill during the months before he died.     He died

unexpectedly of a heart attack on March 4, 1998, at age 54, only

weeks before the cancer would have become extremely painful for

him.    When he died, Frederic owned 975 shares of Kohler common

stock, which was approximately 12.85 percent of all outstanding

capital stock of the company.    After his death, Herbert’s wife,

Natalie Black (Natalie), who was close to Frederic personally,

was appointed personal representative of the estate.

       Natalie is the General Counsel of Kohler.   Before joining

Kohler in 1981, she worked at Quarles & Brady, a Wisconsin law

firm.

Kohler’s Business

       Kohler operates its business through four separate

divisions.    The Kitchen and Bath division is the largest of the
                                -6-

four divisions and generated 70 to 75 percent of the company’s

revenues and profits annually in the years leading up to and

including 1998.   Kitchen and Bath is a full line plumbing

products business that manufactures sinks, lavatories, toilets,

bathtubs, faucets, cabinetry, tile and other products.    The

second largest division is Power Systems, which generated 15 to

20 percent of Kohler’s revenues and profits annually in the years

leading up to and including 1998.     Power Systems manufactures and

sells small gas engines that power lawn, garden, and turf

equipment, as well as small industrial equipment, generators, and

automatic transfer switches and switchgear.

     The Interiors division, the third largest, manufactures and

sells home furnishings and was responsible for 6 percent of

Kohler’s revenues and profits annually in the years leading up to

and including 1998.   The smallest division is Hospitality, which

owns and operates a resort, a spa, and several golf courses.    The

Hospitality division generated about 4 percent of Kohler’s

revenues and profits annually in the years leading up to and

including 1998.

     All four divisions focus on maintaining the standard of

quality and remaining on the leading edge of processing and

product design.   Kohler’s stated mission is to improve the level

of gracious living and to develop products and services that fit
                                -7-

this mission.   Kohler’s diverse product mix is unique.   No other

company sells all of the same types of products.

Privately Held Company

     Kohler has always been a privately held family business.

The Kohler family intends to continue their business as a private

company.   Management did not view dealing with stock analysts,

outside probing, and pressure to produce earnings and raise the

stock price on a regular basis to be in the best interests of the

company.   Herbert realized that public companies were much more

beholden to stock analysts than private companies.   Herbert was

convinced that this type of dependence on outside forces could

lead to unfavorable results for the company.   For example, Kohler

had a long history of faith in its investments and did not seek

to unload them at the first sign of unprofitability.    A public

company might have less flexibility because a poorly performing

investment might decrease earnings and depress the stock price.

Kohler management was happy to avoid these types of concerns.

     Kohler had a unique perspective on its role as a company.

Rather than seeking to maximize its earnings at every

opportunity, several members of Kohler management, including

Herbert and Natalie, viewed themselves as stewards, responsible

for the various constituencies the company touched, including

associates, customers, suppliers, and employees.   This view was

another advantage of being a privately owned company that
                                 -8-

benefited the community at large, and likely would have been more

difficult to implement and maintain if Kohler were public.

     Accordingly, Kohler has never registered its stock with the

Securities and Exchange Commission and has never publicly sold

its stock.    Kohler stock has never traded on any organized

securities exchange.    Small lots, usually just one or two shares,

were sold periodically in private transactions.    Bid and ask

prices for shares of Kohler stock were listed in the National

Quotations Bureau’s pink sheets.    About 36 trades in Kohler stock

were listed in the pink sheets from December 1993 through March

31, 1998.

     Kohler has paid dividends to its shareholders at least

annually since about 1900.    Kohler’s stated policy was to

reinvest at least 90 percent of its earnings in its business each

year, with 7 to 10 percent of earnings paid to shareholders as

dividends.    In recessionary times, Kohler’s policy was to

continue paying dividends even if it meant not reinvesting the 90

percent.    Kohler management knew that the shareholders often

depended on their dividends for their well-being.    Receiving

dividends was the primary way a Kohler shareholder could receive

a return on his or her investment because the company was

private.    The shareholder could not simply sell the shares

whenever he or she wished and could not count on appreciation in
                                 -9-

market price to provide a return.      Dividends were therefore

important to shareholders, and Kohler recognized that.

The Plans

     Kohler generally used two types of projections to plan for

its business.    These projections were called the management plan

and the operations plan, and each had different uses.      The

management plan was a set of achievable targets and reflected the

realities of the business and management’s best judgment of where

the company would be.    The management plan was given to outsiders

intending to transact with Kohler, such as insurance companies

and banks.   Kohler also used the management plan internally for

capital planning, acquisition planning, and tax planning.

Management intended the management plan to be a good predictor of

the company’s performance and updated the management plan

throughout the year to reflect Kohler’s actual results.

     Kohler also developed an operations plan, which was a

projection of what could theoretically be achieved in a perfect

environment.    The operations plan was built on the assumptions

that each business unit would maximize its results and no

contingencies or unforeseen events would occur.      The operations

plan was not generally updated throughout the year to incorporate

new information or unforeseen events.

     The management plan projected earnings for 1999 to be below

those for 1998 and 1997, reflecting the difficulties in the
                                -10-

international markets at the time and economists’ predictions of

either slow growth or a decline in the United States economy.

Indeed, Herbert was aware of excesses creeping into the market

and knew the company’s international investments were not doing

well.

The Reorganization

     In early 1998, Kohler family members, various charities

established by Kohler family members, and trusts for the benefit

of Kohler family members held most of the shares of Kohler stock.

Outside shareholders, however, held about 4 percent of the Kohler

stock in March 1998.    The Kohler family and management wanted to

keep the company as privately owned as possible and remove the

outside shareholders.   The family and management also wanted to

facilitate estate planning for Kohler family members and allow

later generations a vote on company matters.   In addition, the

family and management wanted to resolve control and ownership

questions and ensure that Kohler was ready for future generations

of the family to take control when the time came.   The family and

management considered various options and decided a

reorganization would best meet the company’s needs.

     Kohler initially retained the Dorsey and Whitney law firm to

assist in the reorganization in early 1996.    The reorganization

was finally completed and became effective on May 11, 1998.    The

reorganization replaced the old shares of Kohler common stock
                                 -11-

with new classes of shares that had various voting rights and

dividend preferences.   For each old share, family shareholders

had the right to receive either $52,700 in cash or one share of

voting common stock (which had one vote per share), 244 shares of

series A nonvoting common stock, and 5 shares of series B

nonvoting common stock (which carried the right to an additional

cumulative cash dividend4 of $15 per share for each of 20 years

following the reorganization).    Nonfamily shareholders could not

elect to accept new shares.    Instead, they were required to

either accept the $52,700 per old share cash out price or to

exercise dissenter’s rights.

     All of the new shares of Kohler stock were subject to

transfer restrictions and a purchase option to ensure that family

shareholders would continue to own all of the shares of Kohler.

The reorganization qualified as a tax-free reorganization under

section 368(a).

     Certain nonfamily shareholders exercised their dissenters’

rights in the reorganization and litigated with Kohler to achieve

a higher price for their shares.    Some of these shareholders also

claimed that Kohler management breached their fiduciary duties.

Kohler ultimately settled with these shareholders for varying



     4
      An additional cumulative cash dividend is a dividend paid
in addition to the dividends periodically declared and paid to
all shareholders. If the additional dividend is not declared and
paid when due, the arrears accumulate.
                               -12-

prices, up to $135,000 per share in some cases.    A portion of the

settlement price was attributable to settling the dissenters’

claims for breach of fiduciary duty.

     The estate, which owned 12.85 percent of the voting stock

before the reorganization, could not have blocked or approved the

reorganization on its own.   The estate opted to receive new

Kohler shares in the reorganization rather than accept cash.

After the reorganization, the estate owned 14.45 percent of the

outstanding shares of Kohler stock.     The estate owned a greater

percentage of Kohler after the reorganization than before because

the nonfamily shareholders had been cashed out.    The block of

stock the estate owned was not sufficient by itself to vest the

estate with the power to change management, change the board of

directors, or amend the articles of incorporation.

Valuation of Kohler Stock on the Estate Tax Return

     The estate consisted of primarily cash, some securities and

personal effects, and the Kohler stock.    Natalie, as personal

representative of the estate, retained Willamette Management

Associates (WMA) to value the Kohler stock the estate owned.

Natalie selected WMA for several reasons.    WMA had periodically

appraised the company for various purposes in the past and knew

the company and its business already.    Natalie was also impressed

by WMA’s national reputation and WMA’s connection to Shannon

Pratt, who wrote a well-known book on appraisals entitled
                               -13-

“Valuing a Business.”   Robert Schweihs (Mr. Schweihs) was the WMA

appraiser who handled the valuation of the estate’s stock, and

Natalie knew he was well recognized in the field and was co-

author of “Valuing a Business.”   Natalie gave Mr. Schweihs all

the information he requested in connection with his appraisal.

     WMA’s appraisal report determined that the fair market value

of the Kohler stock held by the estate as of September 4, 1998,

was $47.010 million.5   WMA also determined that the value of the

Kohler stock held by the estate on the date Frederic died was

$50.115 million.   Natalie attached the appraisal reports to the

estate tax return the estate filed.    Natalie elected to value all

of the property in Frederic’s gross estate as of the alternate

valuation date of September 4, 1998, and reported the value of

the Kohler stock on that date, $47,009,625, on the estate tax

return.

     During examination of the estate’s return, respondent

requested numerous documents, many of which the estate produced.

Respondent issued a summons to the estate to obtain certain

documents dealing with post-valuation date events and documents

containing sensitive Kohler business information.   The estate

filed a motion to quash the summons.   Natalie, as personal

representative of the estate, was concerned about the relevancy


     5
      See supra note 3 for a discussion of a minor inconsistency
between the estate tax return, the parties’ stipulations, and the
WMA appraisal.
                                -14-

of the information respondent requested and sought to protect the

private company information.   See Estate of Kohler v. United

States, 89 AFTR 2d 1279, 2002-1 USTC par. 60,435 (E.D. Wis.

2002).   The court denied the motion to quash and the estate then

produced the requested documents.

Deficiency Notices

     Respondent issued a deficiency notice to the estate that

determined the fair market value of the Kohler stock the estate

held on the alternate valuation date was $144.5 million.      This

valuation was based on an appraisal report prepared by Richard

May of Valumetrics Advisors, Inc.      The estate timely filed a

petition.   Respondent also determined deficiencies in gift taxes

for Herbert, Natalie, and Ruth, and each also filed a timely

petition.

                               OPINION

     We are asked to determine the fair market value of the

Kohler stock the estate held and whether any of the petitioners

are liable for the accuracy-related penalty.      The estate argues

that the aggregate fair market value of the Kohler stock it held

on the alternate valuation date was $47,009,625.      Respondent

argues that the fair market value of the stock on the alternate

valuation date was $144.5 million, a difference of approximately

$100 million from the value the estate reported.      We shall begin

by considering the burden of proof.
                                -15-

I.   Burden of Proof

     In general, the Commissioner’s determinations in the

deficiency notice are presumed correct, and the taxpayer has the

burden of proving that the Commissioner’s determinations are in

error.    See Rule 142(a); Welch v. Helvering, 290 U.S. 111, 115

(1933).   The burden of proof may shift to the Commissioner with

respect to a factual issue relevant to a taxpayer’s liability for

tax under certain circumstances, however, if the taxpayer

introduces credible evidence and establishes that he or she

substantiated items, maintained required records, and fully

cooperated with the Commissioner’s reasonable requests.    Sec.

7491(a)(2)(A) and (B).6

     At trial, we granted the estate’s motion to shift the burden

of proof to respondent, because we found that the estate

introduced credible evidence including the testimony of several

factual witnesses, substantiated items, maintained records, and

cooperated with respondent’s reasonable requests.

     A. The Estate’s Cooperation With Respondent

     Respondent urges us to revisit the question of the burden of

proof now, arguing that the estate did not cooperate with

respondent’s reasonable requests because the estate filed a


     6
      Sec. 7491 is effective with respect to court proceedings
arising in connection with examinations by the Commissioner
commencing after July 22, 1998, the date of enactment of the
Internal Revenue Service Restructuring and Reform Act of 1998,
Pub. L. 105-206, sec. 3001(a), 112 Stat. 726.
                                -16-

motion to quash a summons that respondent had issued to obtain

certain documents from the estate.

     We disagree.   Based on our review of the record and

petitioners’ arguments, we find that the estate had a good faith

belief that some of the documents respondent sought were

irrelevant, sealed, or contained sensitive Kohler business

information and filed a motion to quash the summons to protect

its rights.   Once the court denied the estate’s motion to quash

the summons, the estate provided the documents respondent

requested.    Respondent has not argued that respondent’s

investigation was impaired by any lack of documentation.

Moreover, the voluminous exhibits that are part of the record

belie this argument.

     Respondent cites several cases where we did not shift the

burden of proof to the Commissioner where the Commissioner was

forced to issue a summons to force compliance with an information

request.   AMC Trust v. Commissioner, T.C. Memo. 2005-180; Rinn v.

Commissioner, T.C. Memo. 2004-246; Burnett v. Commissioner, T.C.

Memo. 2002-181, affd. 67 Fed. Appx. 248 (5th Cir. 2003); Pham v.

Commissioner, T.C. Memo. 2002-101.     No case that respondent cites

involves a taxpayer’s legitimate attempt to protect confidential

or proprietary business information.    In contrast, these cases

involve sham trusts, taxpayers who failed to file returns,

taxpayers who had unreported income, and taxpayers who asserted
                                -17-

typical tax-protester arguments.   These cases can be

characterized as involving taxpayers with a pattern of

noncooperation with the Commissioner and failure to comply with

tax obligations.

     Unlike the cited cases, the estate had legitimate concerns

about providing confidential and proprietary business information

that was possibly irrelevant and sought to protect the company by

not producing this information until a court required it.     This

is not a tax protester or sham trust case.    In fact, the estate

was cooperative throughout the audit and produced most of the

documents respondent requested, including the documents subject

to the summons once the estate lost its motion to quash the

summons.   See Estate of Kohler v. United States, supra.    Simply

because the estate filed a motion to quash a summons due to

legitimate concerns about the relevancy of the information sought

does not require a finding that the estate failed to cooperate

with respondent.

     B. The Estate’s Introduction of Credible Evidence

     Respondent also argues that the estate has not produced

credible evidence in support of its position.    See sec.

7491(a)(1).   Respondent points out that we have previously held

that opinion testimony is not credible evidence to support

shifting the burden of proof.   See Estate of Jelke v.

Commissioner, T.C. Memo. 2005-131.     Estate of Jelke involved a
                                -18-

disagreement regarding a finite legal conclusion, whether a

corporation’s value should be reduced to reflect a built-in

capital gain liability.   Id.   We held there that the burden of

proof issue was irrelevant when essentially no facts are in

dispute, and we declined to determine which party had the burden

of proof.   Id.

     We agree that, where the underlying facts are not in

dispute, it is irrelevant who has the burden to prove these

facts.   See id.; Estate of Deputy v. Commissioner, T.C. Memo.

2003-176.   Here, however, the parties dispute several important

underlying facts.

     We are asked to determine the fair market value of a portion

of a privately held company operating in numerous market segments

and geographical regions, which is a question of fact.   See

Commissioner v. Scottish Am. Inv. Co., 323 U.S. 119, 123-125

(1944); Helvering v. Natl. Grocery Co., 304 U.S. 282, 294 (1938).

The parties devote numerous pages in their briefs to objecting to

the other side’s proposed findings of fact.   Cf. Estate of Deputy

v. Commissioner, supra.   For example, the parties dispute the

predictive value of the operating plan versus the management plan

and the impact of various economic indicators on the fortunes of

the Kitchen and Bath business segment.

     Moreover, the estate introduced the testimony of several

fact witnesses, in addition to the estate’s two experts, to
                                -19-

support its position.   These witnesses included Herbert, Natalie,

and Jeffrey Cheney, who is the chief financial officer and vice

president of Kohler.    The parties also provided the Court with a

stipulation of facts containing nearly 200 exhibits, which they

used on brief to support their respective positions and to object

to each other’s proposed findings and positions.

      There are enough facts at issue to make the burden of proof

a meaningful issue, rather than simply an academic one.    Cf.

Estate of Jelke v. Commissioner, supra; Estate of Deputy v.

Commissioner, supra.    On this record, which includes such

voluminous evidence, we find that the estate introduced credible,

factual evidence supporting its position.

      Accordingly, we find that the estate has satisfied the

requirements of section 7491(a), and we stand by our ruling at

trial that respondent has the burden of proof.

II.   Choice of Valuation Date and Stock To Be Valued

      We now consider the appropriate valuation date and the

characteristics of the stock to be valued.

      A.   Choice of Valuation Date

      Before trial, petitioners and respondent each filed motions

for partial summary judgment regarding whether the post-

reorganization Kohler stock or the pre-reorganization Kohler

stock should be considered in the valuation.   The Court denied

both motions then because the issue was premature.
                               -20-

     Respondent then sought to amend respondent’s answer after

the deadline for motions with respect to the pleadings to assert

that the proper valuation date was the date of Frederic’s death,

rather than the alternate valuation date.   We denied respondent’s

motion to amend his answer due to the substantial disadvantage

and prejudice to petitioners if respondent amended his answer at

such a late date.   We accordingly shall not consider respondent’s

renewed arguments that the stock should be valued on the date of

Frederic’s death, rather than the alternate valuation date.

     B.   Stock To Be Valued

     Respondent renews two arguments he made in his motion for

partial summary judgment regarding the stock to be valued.     He

argues that we should value the pre-reorganization stock on the

alternate valuation date, or, alternatively, that we should

ignore the transfer restrictions and the purchase option in

valuing the post-reorganization stock.   Although these issues are

now ripe for decision, we reject both respondent’s arguments.

          1.    General Rules on Valuation Date

     Section 2032 allows the executor of an estate to choose to

value the estate’s property at a time after the date of death.

Sec. 2032(a).   If an executor chooses this option, property

“distributed, sold, exchanged, or otherwise disposed of” within 6

months after the decedent’s death is valued as of the date of the

distribution, sale, exchange, or other disposition.   Sec.
                                 -21-

2032(a)(1).    Property that has not been distributed, sold,

exchanged, or otherwise disposed of within 6 months after the

decedent’s death is valued as of the date 6 months after the

decedent’s death.    Sec. 2032(a)(2).   The election to use the

alternate valuation date may only be made if it has the effect of

decreasing the value of the gross estate and the sum of the

estate tax and the generation-skipping transfer tax imposed with

respect to decedent’s property.    Sec. 2032(c).

     There is an exception for tax-free reorganizations under

section 368(a).    Stock exchanged for stock of the same

corporation in a tax-free reorganization is not treated as

distributed, exchanged, sold, or otherwise disposed of under

section 2032(a).    Sec. 20.2032-1(c)(1), Estate Tax Regs.

Accordingly, the Kohler stock is not treated as disposed of on

the date of the reorganization and is not valued as of May 11,

1998, the date of the reorganization, but on the alternate

valuation date instead.    See sec. 2032(a)(2); sec. 20.2032-

1(c)(1), Estate Tax Regs.

          2.      Respondent’s Argument That We Should Value Pre-
                  Reorganization Stock

     Respondent also argues that we should value the pre-

reorganization stock, rather than the post-reorganization stock,

as of the alternate valuation date.     We disagree.   Respondent’s

argument relies on section 20.2032-1(d), Estate Tax Regs.      This

regulation addresses the rules for certain types of property
                                  -22-

interests, such as dividends and leased property, which may

undergo changes in form as dividends are declared and paid or

rent accrues and is paid.   It is those property interests that

exist as of the date of death that are valued if the executor

elects the alternate valuation date.     Sec. 20.2032-1(d), Estate

Tax Regs.   These date of death property interests remain included

in the estate even if they change in form (such as in a

disposition) between the date of decedent’s death and the

alternate valuation date.   Id.

     This provision does not support respondent’s argument that

stock received in a tax-free reorganization should be disregarded

and that the pre-reorganization stock should be valued instead.

In fact, the regulation does not discuss tax-free

reorganizations.   Nothing in this regulation requires us to

disregard the tax-free reorganization when valuing the property.

We therefore find no authority to treat such an exchange as a

change in form or to disregard the exchange.7


     7
      We note that the fair market value of the post-
reorganization stock must generally equal the fair market value
of the pre-reorganization stock for the reorganization to be tax
free. See Rev. Rul. 74-269, 1974-1 C.B. 87; Rev. Proc. 86-42,
sec. 7.01(1), 1986-2 C.B. 722 (prerequisite to advance ruling
that a type A merger will be tax free is a representation that
the fair market value of the acquirer stock and other
consideration received will be approximately equal to the fair
market value of the target stock surrendered in the exchange);
Rev. Proc. 81-60, sec. 4.03(2)(d), 1981-2 C.B. 680, 682
(prerequisite to advance ruling that a type E recapitalization
will be tax free is a representation that the fair market value
                                                   (continued...)
                                  -23-

           3.      Respondent’s Argument To Disregard Transfer
                   Restrictions and Purchase Option

     Respondent argues alternatively that the post-reorganization

Kohler stock the estate held on the alternate valuation date

should be valued without regard to the transfer restrictions and

purchase option.     See Flanders v. United States, 347 F. Supp. 95

(N.D. Cal. 1972).     We disagree.

     Flanders involved restrictions implemented between the date

of death and the alternate valuation date that reduced the value

of land by 88 percent.     The District Court held that these

restrictions should not be considered in valuing the land,

relying on statements by a congressman on the floor of Congress

before the enactment of section 2032 that the section is intended

to address changes in value caused by market forces.     Respondent

argues that we should reach a similar result here.

     We look to legislative history when statutory language is

ambiguous.      Blum v. Stenson, 465 U.S. 886, 896 (1984).   There is

no ambiguity here and thus no need to consider legislative

history.   The terms “distributed, sold, exchanged, or otherwise

disposed of” in section 2032 are explained in the regulations.

The regulations specify that “otherwise disposed of” does not



     7
      (...continued)
of the shares to be surrendered will equal the shares to be
received in exchange). As the parties stipulated that the
reorganization was tax free, we question why respondent continues
to make this argument.
                               -24-

include transactions under section 368(a) where no gain or loss

is recognizable.   Sec. 20.2032-1(c)(1), Estate Tax Regs.

Moreover, we find the regulation consistent with the legislative

history relied on by the District Court in Flanders because the

legislative history describes the general purpose of the statute,

not the specific meaning of “otherwise disposed of” in the

context of tax-free reorganizations.    The meaning adopted in

section 20.2032-1(c)(1), Estate Tax Regs., is consistent with

this general purpose, reflecting the Secretary’s determination

that tax-free reorganizations do not constitute dispositions

because of the strict requirements in the corporate

reorganization provisions.

     Accordingly, we shall value the post-reorganization stock on

the alternate valuation date, including the transfer restrictions

and the purchase option.   See sec. 2032(a); sec. 20.2032-1(c)(1),

Estate Tax Regs.

III. Valuation of Kohler Stock the Estate Owned

     The parties have narrowed the valuation questions in this

case to the value of Kohler stock the estate owned.    The value of

property is a quintessential question of fact.    The parties

advocate values on the alternate valuation date that are

approximately $100 million apart.     We begin our analysis of the

experts’ reports after first discussing the law on valuing

property.
                                  -25-

     A. Fair Market Value

     The transfer of the taxable estate on the decedent’s death

is subject to estate taxes.    Sec. 2001; Estate of Deputy v.

Commissioner, T.C. Memo. 2003-176.       The taxable estate is the

gross estate less allowable deductions.      Sec. 2051.   The gross

estate includes the value of all property owned by a decedent at

the time of death.   Sec. 2031.    In most instances, the value of

the gross estate is the fair market value of the included

property as of either the date of death, or the alternate

valuation date under section 2032 if the personal representative

elects, as Natalie did here.   Sec. 20.2031-1(b), Estate Tax Regs.

     Fair market value is the price at which property would

change hands between a willing buyer and a willing seller,

neither under any compulsion to buy or sell and both having

knowledge of relevant facts.   Sec. 20.2031-1(b), Estate Tax Regs.

The determination of fair market value is a question of fact, and

the trier of fact must weigh all relevant evidence of value and

draw appropriate inferences.      Commissioner v. Scottish Am. Inv.

Co., 323 U.S. 119 (1944); Helvering v. Natl. Grocery Co., 304

U.S. 282 (1938).

     While listed prices normally establish fair market value of

publicly traded stock, the value of unlisted stock is best

determined by considering actual sales at arm’s length in the

normal course of business within a reasonable time before or
                                 -26-

after the valuation date.     Estate of Andrews v. Commissioner, 79

T.C. 938, 940 (1982); Estate of Noble v. Commissioner, T.C. Memo.

2005-2.    When arm’s-length sales of unlisted stock are

unavailable or inconclusive, the value of closely held stock

shall be determined by considering all other available financial

data and all relevant factors that would affect fair market

value.    Rev. Rul. 59-60, 1959-1 C.B. 237.   These factors include

the corporation’s net worth, prospective earning power, dividend-

paying capacity, and other factors.     Estate of Andrews v.

Commissioner, supra at 940; sec. 20.2031-2(f), Estate Tax Regs.;

Rev. Rul. 59-60, sec. 4.01, 1959-1 C.B. at 238.     These factors

cannot be applied with mathematical precision, and the weight

given to each factor must be considered in light of the

particular facts of each case.    Estate of Andrews v.

Commissioner, supra at 940-941.

     B.     Expert Opinions

     Both parties submitted expert reports providing valuations

of the estate’s Kohler stock as of the alternate valuation date,

which considered many different factors and ascribed different

weights for each, resulting in a wide range of proposed

valuations.8   See Estate of Deputy v. Commissioner, supra.    The


     8
      Both parties also submitted expert reports providing
valuations of the stock as of Frederic’s date of death. The
expert report the estate submitted as of Frederic’s date of death
concluded that the value of the stock was higher on the date of
                                                   (continued...)
                                -27-

experts’ value conclusions with respect to the estate’s stock on

the alternate valuation date differed by more than $100 million,

no nominal amount.

     When considering expert testimony, a court is not required

to follow the opinion of any expert if it is contrary to the

court’s judgment.    Id. (citing Helvering v. Natl. Grocery Co.,

304 U.S. at 295 and Silverman v. Commissioner, 538 F.2d 927, 933

(2d Cir. 1976), affg. T.C. Memo. 1974-285).   A court may adopt or

reject expert testimony and will reject expert testimony where

the witness’ opinion of value is so exaggerated that the

testimony is incredible.   Estate of Hall v. Commissioner, 92 T.C.

312, 338 (1989); Chiu v. Commissioner, 84 T.C. 722, 734-735

(1985); Estate of Deputy v. Commissioner, supra.

     We are not obligated to pay any regard to an expert opinion

that lacks credibility.    Estate of Hall v. Commissioner, supra;

Chiu v. Commissioner, supra; Estate of Deputy v. Commissioner,

supra.   We may find evidence of valuation provided by one of the

parties to be much more credible than that of the other party, so

that our findings result in a significant victory for one side,

rather than a compromise between the two.   See Buffalo Tool & Die

Mfg. Co. v. Commissioner, 74 T.C. 441, 452 (1980).




     8
      (...continued)
death than on the alternate valuation date.   See sec. 2032(c).
                               -28-

     We shall now examine the experts’ opinions and

methodologies, keeping in mind that respondent has the burden of

proof to show that the value the estate reported on its return is

incorrect.

     C.    Respondent’s Expert Witness:   Dr. Scott Hakala of CBIZ

     Because respondent has the burden of proof, we shall first

consider the conclusions of respondent’s expert witness, Dr.

Scott Hakala.   Dr. Hakala concluded that the fair market value of

the estate’s stock on the alternate valuation date was $156

million.   We explained to the parties after respondent rested his

case that we had grave concerns about Dr. Hakala’s valuation

methods and conclusions.   We continue to have these concerns.

           1.   Dr. Hakala’s Background and Certifications

     Although Dr. Hakala has a doctorate from the University of

Minnesota and is a chartered financial analyst, he is not a

member of the American Society of Appraisers (ASA) nor the

Appraisal Foundation.   Dr. Hakala’s report also was not submitted

in accordance with the Uniform Standards of Professional

Appraisal Practice (USPAP).   Dr. Hakala did not provide the

customary USPAP certification, which assures readers that the

appraiser has no bias regarding the parties, no other persons

besides those listed provided professional assistance, and that

the conclusions in the report were developed in conformity with

USPAP.
                               -29-

          2. Dr. Hakala’s Valuation Processes and Methodologies

     Dr. Hakala’s background research on Kohler was limited.    He

met with Kohler management just once, for about 2-1/2 hours.    He

did obtain financial information from the company including both

the operations plan and management plan, however, and also

considered industry information.

     Dr. Hakala used two of the three traditional approaches to

business valuation, the income approach and the market approach.

We agree with his decision not to use the third approach, the

cost approach, which is best suited for asset-intensive

businesses rather than going concerns.    Like petitioners’

experts, he also did not consider any actual sales of Kohler

stock in his analysis.   We shall briefly describe Dr. Hakala’s

use of the income approach and the market approach.

     Dr. Hakala used only one method under the income approach,

and it was not a dividend-based method.    He used only a

discounted cash flow (DCF) method.9   Dr. Hakala stated that the

DCF method was the most accurate method and was convinced of the

redundancy or unreliability of dividend-based methods.10


     9
      The DCF method discounts to present value the expected
future income of the corporation to generate a value for the
business and the stock.
     10
      Dividend-based methods, in contrast to the DCF method,
generally value the stock based on the expected future dividends
to be received on the stock. Some dividend-based methods also
take into account the probability of possible liquidity events
                                                   (continued...)
                                  -30-

     In forecasting the cash flow for the DCF method, Dr. Hakala

did not use the expenses in the projections Kohler provided him.

He decided to make his own assumptions about expenses.     Dr.

Hakala applied these assumptions without first discussing them

with anyone at Kohler.

     Dr. Hakala created two DCF models, one using revenues from

the operations plan and one using revenues from the management

plan.     He weighted the results he derived from these two DCF

models in a manner inconsistent with the reality of the business.

He weighted the realistic management plan based model 20 percent

and the more aspirational operations plan based model 80 percent

because he thought the aspirational operations plan was a more

likely scenario.

     Dr. Hakala made a last minute correction to the value he

determined under the income approach at trial.     His error

resulted in an $11 million overvaluation of the Kohler stock in

his report.

     Under the market approach, Dr. Hakala used two methods.

Like the estate’s experts, he used the guideline company method,

but was the only one of the three experts who used the

transaction method.11     While the estate’s experts did not find


     10
      (...continued)
such as initial public offerings.
     11
          The guideline company method examines certain financial
                                                       (continued...)
                                 -31-

transactions in companies that had sufficient similarity to

Kohler, Dr. Hakala found transactions he thought were comparable

and then applied the ratios he found in those transactions to

value the Kohler stock.

     Once Dr. Hakala determined the values under the transaction

method and the guideline company method, Dr. Hakala decided to

weight the guideline company approach 80 percent and the

transaction method 20 percent.    Dr. Hakala thought the guideline

company method was more reliable, and there were not very many

comparable transactions that could be used in the transaction

method.

     After Dr. Hakala had weighted the values he found under each

approach, he averaged the approaches and considered whether a

discount for lack of marketability should be applied.   He

concluded a 25-percent discount was appropriate.

     Including his adjustment for his $11 million error, Dr.

Hakala determined that the Kohler stock held by the estate was

worth $156 million on the alternate valuation date.



     11
      (...continued)
information and market prices of publicly traded comparable
companies and compares that financial information with financial
information of the corporation to be valued to project the price
that shares of the corporation to be valued would sell for if the
corporation to be valued were publicly traded. The transaction
method is similar to the guideline company method except that
comparable companies that have recently been acquired are
selected and the financial information is compared to the price
obtained in the transaction, rather than the market price.
                                  -32-

             3.   Analysis

     We have several significant concerns about the reliability

of Dr. Hakala’s report.      These concerns lead us to place no

weight on Dr. Hakala’s report as evidence of the value of the

Kohler stock the estate held.      We have previously discussed the

lack of customary certification of Dr. Hakala’s report and that

his report was not prepared in accordance with all USPAP

standards.    We also have already noted that Dr. Hakala admitted

that his original report submitted to the Court before trial

overvalued the estate’s Kohler stock by $11 million, or more than

7 percent of the value he finally decided was correct.        This is

not a minor mistake.    When we doubt the judgment of an expert

witness on one point, we become reluctant to accept the expert’s

conclusions on other points.      Brewer Quality Homes, Inc. v.

Commissioner, T.C. Memo. 2003-200, affd. 122 Fed. Appx. 88 (5th

Cir. 2004).

     Moreover, we are convinced from his report and trial

testimony that Dr. Hakala did not understand Kohler’s business.

He spent only 2-1/2 hours meeting with management.        He decided

the expense structure in the company’s projections was wrong and

decided to invent his own for his income approach analysis.        He

did not discuss his fabricated expense structure with management

to test whether it was realistic.        Dr. Hakala also decided to

weight the operations plan model 80 percent and the management
                                 -33-

plan model only 20 percent under the income approach, despite the

admonitions of management that the operations plan projections

were only what could be created in a perfect environment while

the management plan forecasted realistic, achievable targets.

     In addition, Dr. Hakala did not use a dividend-based method

under the income approach, although the record reflects that

periodic dividends were the primary means of obtaining a return

on Kohler stock due to the privately held nature of the company.

When asked why he did not use the dividend method at trial, Dr.

Hakala argued first that the DCF analysis made other income

approaches redundant and then stated that dividend-based methods

were unreliable.   We are concerned by Dr. Hakala’s choice to

ignore any dividend-based method for Kohler, a privately owned

company that periodically and historically has paid large

dividends as a return to its shareholders, recognizing that no

ready market exists for a shareholder wishing to sell.

     We found after the estate’s case in chief that respondent

has the burden to prove that the value of the Kohler stock on the

estate’s return was incorrect.    After carefully reviewing and

considering all of the evidence, we continue to find Dr. Hakala’s

conclusions to be incredible.    We therefore give no weight to

respondent’s expert’s conclusions.      Respondent has therefore not

met his burden of proof.   Accordingly, we find the value of the
                                -34-

estate’s stock to be the amount the estate reported on its

return, $47,009,625.

     D.   Petitioners’ Expert Witnesses

     We now briefly describe the reports and valuation

conclusions of petitioners’ experts, Mr. Schweihs and Mr.

Grabowski, each of whom we find thoughtful and credible.    We give

significant weight to their reports, which lend further support

to our conclusions.

          1.     Mr. Schweihs’ Valuation

     Mr. Schweihs is a managing director of WMA, has been

accredited as a senior appraiser in business valuation by the

ASA, and is a Certified Business Appraiser of the Institute of

Business Appraisers.    He has authored several books, including

co-authoring “Valuing a Business” with Shannon Pratt and Robert

Reilly,12 and has written between 50 and 100 articles on valuing

businesses.    Mr. Schweihs also gives two to four lectures a year

on the topic.   He has appraised businesses since the early 1980s,

and his core work is valuing businesses and business interests,

including advising acquirers and sellers, taxation matters, and

dispute resolution.    Mr. Schweihs had periodically performed

valuations of Kohler stock in the several years before the

valuation date and is very familiar with the company.    For this



     12
      Shannon P. Pratt, Robert F. Reilly & Robert P. Schweihs,
Valuing a Business (4th ed. 2001).
                               -35-

assignment in particular, he was required to review significant

information regarding the company and interview Kohler

management.

     Mr. Schweihs used the income approach and the market

approach to value the estate’s Kohler stock.   Under the income

approach, Mr. Schweihs used not only the DCF method, but also the

discounted dividend method and the dividend capitalization

method.   He recognized that the dividend methods were important

indicators of value where dividends represent the best, if not

the only, opportunity for a minority shareholder to receive a

cash return on his or her investment.   Under the market approach,

Mr. Schweihs used the capital market method, also known as the

guideline company method.   Mr. Schweihs did not use the

transaction method, unlike Dr. Hakala, because he was unable to

find transactions in companies sufficiently similar to Kohler

where there was adequate information available.

     Mr. Schweihs also did not account for prior sale

transactions of Kohler stock in determining the value.     He

determined that the transactions included a premium for being

able to be a shareholder in a prominent, privately held company

like Kohler, and that this premium could not be quantified.13


     13
      We also note that the evidence of the pre-reorganization
transactions (including the $135,000 price received by the
dissenting shareholders in the litigation) is not helpful because
these transactions involve pre-reorganization stock, which is not
                                                   (continued...)
                              -36-

Mr. Schweihs also determined that the prices paid in the

transactions were not justified by analyzing the company’s

historical and expected future performance.

     Mr. Schweihs also did not rely on the asset-based approach

because Kohler is a going concern operating company.   An asset-

based approach, in his view, generally is not a reliable

indicator of value for going concern companies.

     Mr. Schweihs applied a 45-percent lack of marketability

discount to the values he determined under the DCF method and the

capital market method, and a 10-percent lack of marketability

discount to the values he determined under the discounted

dividend method and the capitalization of dividends method.    He

used a lower discount for lack of marketability under the

dividend methods because, in his view, the dividend method more

directly reflected the value of the shares.   Mr. Schweihs also

determined that a 26-percent discount for lack of control applied

to the value he determined under the DCF method.

     Mr. Schweihs weighted the DCF method and the capital market

method each 20 percent in his final analysis, and gave 30 percent

weights to each of the dividend methods.   He concluded that the

fair market value of the Kohler stock the estate owned on the


     13
      (...continued)
the stock we value in this case. For example, the pre-
reorganization stock did not have the same transfer restrictions
and purchase option (thus affording purchasers more liquidity),
and the capital structure was different.
                               -37-

alternate valuation date was $47.010 million.    Mr. Schweihs used

a similar analysis to value the pre-reorganization shares on the

date of Frederic’s death, 6 months earlier, and determined the

fair market value of those shares on the date of Frederic’s death

was $50.115 million.

           2.   Mr. Grabowski’s Valuation

     Mr. Grabowski was another expert who prepared an appraisal

report and testified for the estate.   He has been valuing

companies since 1974, first with S&P Corporate Value Consulting

and since September 2005, as a managing director with Duff &

Phelps.   He is a member of the ASA and is an accredited senior

appraiser with the ASA in business valuation.   He has taught

finance and valuation courses at Loyola University, taught

classes for the ASA, and teaches a class on cost of capital.    The

majority of his work is valuation services in nonlitigation

settings, and he has valued several businesses similar to Kohler,

including plumbing fixture businesses and closely held companies.

     Mr. Grabowski spent 3-1/2 days at the company and

interviewed 12 employees, spending considerable time with 6 of

them, including Herbert (the President and Chairman of the Board)

and Natalie (the General Counsel).    Mr. Grabowski also reviewed

numerous documents and considered general economic conditions and

the industries in which Kohler operates.
                               -38-

     Mr. Grabowski used the income approach and the market

approach to value the Kohler stock.    Under the income approach,

Mr. Grabowski used the DCF method, the discounted dividend

method, and the adjusted discounted dividend method.   Mr.

Grabowski used the management plan to perform these analyses

because he considered it the most accurate estimate of the future

performance of the company.

     Under the market approach, Mr. Grabowski used the guideline

publicly traded company method.   He identified publicly traded

companies in each market segment in which Kohler operated and

applied valuation multiples to these entities to estimate the

value of each Kohler market segment.   He then weighted the

valuation conclusion as to each segment of the business based on

the relative portion of Kohler’s business that the segment

comprised.   Mr. Grabowski did not use the cost approach because

Kohler was a growing and profitable business that was likely

worth more than the values of its assets.

     Mr. Grabowski then considered each of the values he had

determined and found that they all resulted in values fairly

close to each other.   He assessed the strengths and weaknesses of

each method and ultimately decided that the adjusted discounted

dividend method was the most appropriate method because it

reflected the actual cash flows a shareholder could expect to

receive.   The adjusted discounted dividend method also reflected
                                -39-

the remote possibility that Kohler would be sold or undergo an

initial public offering.   The closeness of the values determined

by the other methods acted as a check that this value was

correct.   He also reconciled his conclusion to prior sales of

Kohler stock to confirm the reasonableness of the analysis.

     Mr. Grabowski then made adjustments to the value determined

under the adjusted discounted dividend method to reflect that

Kohler was closely held and the number of shares of stock the

estate owned.   Mr. Grabowski settled on a 35-percent discount for

lack of marketability.   He determined this discount was correct

by considering studies of restricted stock and the stock of other

companies similar to Kohler.    He found that the restricted stock

studies did not give the full picture of the appropriate

marketability discount because the studies involved only

companies that eventually went public and therefore their shares

eventually became marketable.   Mr. Grabowski concluded an

eventual public offering was not likely with Kohler and therefore

determined that a slightly higher discount was appropriate.

     Mr. Grabowski determined that a 25-percent adjustment for

lack of control was warranted only in considering the value of

the Hospitality group and in considering the price paid to

dissenting shareholders in the reorganization.   In making the

25-percent adjustment, he considered factors such as the Kohler

family’s stated intention to control the company long term,
                                -40-

certain sales of Kohler stock, transactions in the industry

involving acquisitions of businesses with control premiums, and

published benchmark data.

     Mr. Grabowski then adjusted the value he determined for the

adjusted discounted dividend method to reflect the discounts for

lack of marketability and lack of control to determine that the

fair market value of the estate’s Kohler stock on the alternate

valuation date was $63,385,000.

           3.   Analysis

     We are impressed by the valuation methodologies and

conclusions of Mr. Schweihs and Mr. Grabowski.    Both are

certified appraisers who spent sufficient time with the company

and management to understand the Kohler business.    They used the

correct projection to value the business, the realistic and

accurate management plan, as a result of their understanding of

Kohler.   They were also aware that the primary return a

shareholder could expect from owning Kohler stock was from

periodic dividends, and both made dividend methods an essential

component of their analyses.

     We find that the estate’s experts have provided thoughtful,

credible valuations strongly supporting the value the estate

reported on its tax return.    We also find that the estate’s

experts’ appraisals are more thorough and consistent with

traditional appraisal methodologies for closely held companies
                                -41-

like Kohler.    We accordingly give significant weight to their

valuations.

IV.   Valuation of the Estate’s Stock

      As previously stated, we give no weight to respondent’s

expert’s valuation of the estate’s stock.    Respondent failed to

introduce any evidence or present any arguments to persuade us

that the value reported on the estate’s tax return was incorrect,

and accordingly respondent has failed to meet his burden of

proof.    In contrast, both of the estate’s experts provided

thoughtful valuations reflecting the true nature of the Kohler

business and used valuation methods considered reliable for

privately held companies like Kohler.    Each valuation provided

persuasive support for the value the estate reported on its

return.    We ascribe great weight to both of these valuations and

further find that the estate’s experts’ reports created a range

significantly closer to the actual fair market value than

respondent’s expert found.

      Accordingly, based on our review of all of the valuation

evidence, giving due regard to our observation at trial of the

witnesses for both parties and considering their testimony and

the expert reports, we conclude that the fair market value of the

Kohler stock owned by the estate on the alternate valuation date

was $47,009,625.
                                -42-

V.   Accuracy-Related Penalty

     We have found the value of the stock held by the estate is

the value the estate reported on its return.    We therefore need

not address whether the estate is liable for the accuracy-related

penalty.   Respondent also determined that the petitioners in the

gift tax cases were liable for the accuracy-related penalty under

section 6662(a).

     There is generally a 20-percent penalty on any portion of an

underpayment attributable to a substantial estate or gift tax

valuation understatement.   Sec. 6662(a) and (b)(5).   There is a

gift tax valuation understatement where property is reported on a

gift tax return at a value 50 percent or less than the value

eventually determined by the court.    Sec. 6662(g)(1).   Where

property is reported at a value less than 25 percent of the value

eventually determined by the court, the penalty imposed under

section 6662 is increased from 20 percent to 40 percent.     Sec.

6662(h).   Respondent has the burden of production regarding

penalties and must come forward with evidence that it is

appropriate to impose the penalty.     See sec. 7491(c); Higbee v.

Commissioner, 116 T.C. 438, 446-447 (2001).

     The parties have stipulated that the final value of the

gifts will be governed by our ruling on the value of the estate’s

stock and have provided us with the formula they intend to use to

calculate the valuation of each gift.    Based on our review of
                              -43-

this formula and the value we concluded in the estate tax case,

we find that none of the petitioners in the gift tax cases has

made a substantial gift tax valuation understatement.   See sec.

6662(g).

     To reflect the foregoing and the concessions of the parties,


                                          Decisions will be entered

                                     under Rule 155.
