§ 15551.9. Untraded and Closely Owned Securities.

(a) The value of corporate or other bonds not traded on an open market is usually arrived at by giving consideration to the security behind the bonds, the interest yield, the date of maturity, and other relevant factors.

The value of shares of closely held stock is usually arrived at by first ascertaining the net worth (the excess of the assets, including good will, if any, over liabilities) of the corporation as a going business, and then assigning to each share its proportion of such worth.

In determining net worth the tangible assets of the business in question should be valued at their market value at the date of gift to a going concern, and not at their cost to the particular business nor at their book value.

(b) Among other factors that will be considered in the valuation of closely held stock are the following:

(1) The period of time that the issuing corporation has been in existence and its position in the trade.

(2) The nature of the corporation.

(3) The operating history of the corporation and, particularly, its earnings over a reasonable period of time.

(4) The balance sheet of the corporation.

(5) The standard of earnings maintained by concerns engaged in similar lines of endeavor.

(6) The strength and danger of competition, both existing and potential.

(7) The management and personnel.

(8) The effect of possible governmental regulation.

(9) The present and future requirements of the corporation in the matter of new land, buildings, or equipment.

(10) Current business policy.

(11) Dividend payment history.

(12) The prices paid on private sales of the shares to persons who were in a position to know their value.

(13) The prospects for future earnings.

Note

Note: Reference: Section 15551, Revenue and Taxation Code.