- 30 -
rate applied to the promissory notes, resulting in a liability of
$73,609 as of the valuation date. Mr. Mitchell subtracted the
discounted value of the notes payable, the property taxes and
interest, and the $499 accounts payable from the fair market
value of Clubside’s assets, and arrived at a net asset value of
$2,319,634. Mr. Mitchell felt that a 35-percent lack of
marketability discount and an 18-percent minority interest
discount were appropriate for Clubside.26 Mr. Mitchell
determined that the aggregate value of Clubside was $1,229,406
and that the fair market value of decedent’s 27.5-percent
interest was $338,000.27
Mr. Bishop determined the value of decedent’s partnership
interest in a different manner. He projected the sale of the
Cathead property over a period of 3 years. Then, Mr. Bishop
subtracted the amount of interest that would accrue on the
promissory notes and the amount of property taxes due on the
Cathead property after 3 years. Mr. Bishop assumed that the
value of the Cathead property would remain constant at
26The estate does not object to the percentage figures used
by Mr. Mitchell in applying the lack of marketability and
minority interest discounts. Mr. Mitchell combined the two
discounts, resulting in a combined discount rate of 46.7 percent,
which he rounded up to 47 percent.
27We note that respondent’s valuation is more than 25
percent less than the value determined as of Dec. 31, 1993, in
the financial statement prepared for Mr. Hoffman by his
accountant.
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