Freres Lumber Co., Inc. - Page 29

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                  7.     Conclusion About the Value of the Covenants Not                                   
                         To Compete                                                                        
                  We conclude that D.C. Walker's covenant not to compete had a                             
            fair market value of $900,000 on March 1, 1988.  Because Mary                                  
            Walker had less experience in the timber industry and no stated                                
            intent to compete and posed no credible threat to petitioners, we                              
            conclude that the fair market value of her covenant not to                                     
            compete was zero on March 1, 1988.  While Bebout lacked                                        
            experience in certain aspects of the timber industry, we think                                 
            her knowledge, the fact that her brother competed effectively,                                 
            and her subsequent work history show that her covenant had some                                
            value, which we conclude was $30,000.                                                          
            B.    Fair Market Value of Land                                                                
                  Petitioner reported that the fair market value of the land                               
            belonging to the Walker entities was $130,000 on March 1, 1988.                                
            Respondent determined that the fair market value was $200,000.                                 
                  The land consisted of the mill site and ancillary land.  The                             
            mill site was the 35-acre area surrounding the mills.  The rest                                
            of the land (about 93.5 acres) was ancillary land.  Darr Goss                                  
            (Goss), petitioner's expert real property appraiser, concluded                                 
            that the land was worth $145,000 based on six sales of land                                    
            comparable to the mill site and five sales of land comparable to                               
            the ancillary land.  Respondent did not cross-examine Goss or                                  
            offer any evidence about the fair market value of the land.                                    

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