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T. Freres, Jr., and Theodore F. Freres allocated the purchase
price for petitioner.
Petitioner carefully calculated the value of Forest Service
timber contracts it bought from the Walker family before it
agreed to the sale. The fair market value of Forest Service
timber contracts that petitioner bought from the Walker entities
was $1.5 million on March 1, 1988. Petitioner did not buy other
Walker timber contracts that it believed had an excessive
contract price. Petitioner used the fair market value of the
timber contracts in its allocation.
Before March 1, 1988, petitioner's owners and officers often
attended used equipment auctions and regularly reviewed sales
brochures for used equipment. They knew the fair market values
of used equipment and rolling stock that were similar to the
equipment and rolling stock petitioner bought from the Walker
family.
Petitioner examined the real property and estimated the
value of the land and buildings. A solid waste disposal site was
on the premises, and part of the property was contaminated with a
toxic chemical.
Robert T. Freres, Jr., told Larry Smith (Smith), Freres'
certified public accountant, the final purchase price allocation.
Smith then told the Freres' attorney, Richard Miller (Miller).
Miller inserted that allocation in the Walker sale agreement.
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