## Facts

- The suits consolidated three federal gift-tax refund actions by Heekin family estates and fiduciaries against the United States.
- The property at issue was stock of Heekin Can Company, a closely held metal-can manufacturer with limited pre-gift trading.
- Two 1954 gift dates were relevant: August 3, 1954 (30,000 shares transferred) and October 25, 1954 (40,002 shares transferred).
- Sparse pre-gift trades of the stock generally occurred at about $7.50 per share.
- Donors initially reported the gifted stock at $10 per share, later filed amended returns and refund claims asserting $7.50 per share, and the IRS disallowed the claims while asserting higher values and deficiencies.
- At trial, taxpayers’ experts largely emphasized limited prior sales and certain post-gift or stale financial data; government experts emphasized capitalization of earnings, dividends, and book value, producing materially higher values.
- A trial commissioner conducted a joint trial and issued findings and recommended conclusions setting per-share values for each gift date between the parties’ extremes.
- The Court of Claims issued a per curiam decision adopting the commissioner’s findings and recommendations as the basis for judgment, leaving exact refund amounts to computation.

## Issues

1. What was the fair market value of Heekin Can Company stock on the August 3 and October 25, 1954 gift dates for federal gift-tax purposes?
2. Based on those values, were the donors entitled to refunds of gift taxes paid?

## Decision

- The Court of Claims adopted the trial commissioner’s findings of fact and recommended conclusions of law in full.
- The court entered judgment for the plaintiffs in each consolidated case.
- The court held the stock’s fair market value was lower than the IRS’s asserted value, resulting in overpayment and entitlement to refunds.
- The amounts of recovery were to be computed under the court’s Rule 38(c).

## Legal Principles

- Fair market value for gift-tax purposes is determined as of the gift date under a hypothetical willing-buyer/willing-seller standard using information reasonably available at that time.
- Valuation of closely held stock requires consideration of multiple factors, including earnings and earning capacity (often via capitalization), dividend history, book value, nature and outlook of the business, and the size and character of the block transferred (including minority, noncontrolling status).
- Isolated prices from a thin or restricted market may be given limited weight where the transactions do not reliably reflect arm’s-length pricing or the company’s earnings power and financial condition.
- Expert valuations may be discounted when they rely materially on post-valuation-date information or omit material contemporaneous indicators such as recent earnings trends.

## Conclusion

The Court of Claims, adopting the commissioner’s multi-factor valuation of a closely held corporation, rejected the IRS’s higher asserted stock values for two 1954 gift dates and entered judgment awarding gift-tax refunds, with amounts to be computed under the court’s rules.


Central Trust Co. v. United States, 305 F.2d 393 (Ct. Cl. 1962)