Estate of Louise Paxton Gallagher, Deceased, F. Gordon Spoor, Personal Representative, Petitioners

SUPPLEMENTAL MEMORANDUM OPINION

HALPERN, Judge: Our Memorandum Findings of Fact and Opinion in this case was reported as Estate of Gallagher v. Commissioner, T.C. Memo. 2011-148.

We issue this supplemental opinion to *This opinion supplements our previously filed Memorandum Opinion, Estate of Gallagher v. Commissioner, T. C. Memo. 2011- 148.

correct an error in our computation of the value of 3,970 membership interests (units) in Paxton Media Group, LLC, a Kentucky limited liability company included in Louise Paxton Gallagher's gross estate.

In the appendix to our original report, we calculated the value of the 3,970 units to be $32,601,640 by using a discounted cashflow analysis.

We computed the total present value of expected cashflows for 5 years and added to that sum the present value of a reversion, which we assumed to be received at the end of the fifth year.

In computing the present value of the reversion, we erred in using the present value factor "(1 + 0.1)'".

To determine the present value of the reversion to be received at the end of the fifth year, the value of the exponent in the present value factor should have been 5, not 6.

We have attached hereto a new appendix in which.we have revised our computation of the value of the 3,970 units, using the corrected present value factor and determining a value for the units of $35,761,760 (an increase of $3,160,120), which we find to be the value of the 3,970 units (the shares) as of the valuation date.

Decision will be entered under Rule 155, Tax Court Rules of Practice and Procedure.

Proiected Items Revenue Operating income (@ 36.4% op. margin) Other income (expense) (@ 0.1% of revenue) Adjusted operating income Cashflow adiustments + Depreciation (3.1% of revenue) (-) Working capital additions (-2.5% of revenue) (-) Capital expenditures (2.8% of revenue) Yearend cashflow Discount rate (WACC) Present value interest factor (1 / (1.1)") Present value of cashflows Total present value of cashflows (year 1 - year S) Present value of reversion:

66,434,946 (1.01 / (0.1 - 0.01)) / ((1 + 0.1)5) T.otal_present-va-l-ue-of--all-future--cashfl-öwir - Long-term debt Enterprise value of PMG (w/o discount) Value less in-the-money value of options¹ Value with 23% minority discount Value with 31% lack of marketability discount Value of each unit Value of 3,970 units * Last 12 months APPEDU)IX !1P.5ÈÅoILJ2_f_.L_910 Uflits of Paxton Media Group, LLC as of July 5, 2004 LTM* ended June 27, 2004 Year 1 Year 2 Year 3 $163,602,288 $172,514,890 $175,102,613 $176,853,640 62,795,420 63,737,351 64,374,725 Year 4 Year 5 $178,622,176 $180,408,398 65,018,472 65,668,657 172,515 175,103 176,854 178,622 180,408 62,967,935 63,912,454 64,551,579 65,197,094 65,849,065 5,347,962 5,428,181 5,482,463 5,537,288 5,592,660 222,815 64,693 43,776 44,213 44,656 (4,830,417) (4,902,873) (4,951,902) (5,001,421) (5,051,435) 63,708,295 64,502,455 65,125,916 10% lo 0.9091 0.8265 0.7513 57,917,211 53,311,279 48,929,101 65,777,174 66,434,946 10% 10% 0.6830 0.6209 44,925,810 41,249,458 $246,332,859 462,981,425 709,314,284 (243,602,413) 465,711,871 448,290,271 345,183,509 238,176,621 9,008 35,761,760 9,008-$2,786) x $2,800 = $17,421,600 .