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Petitioner's expert also relies on certain market studies that
would indicate combined discounts for minority interests and lack
of marketability of between 30 and 60 percent.
Respondent's expert concludes that looking ahead from the
December 31, 1989, date-of-death valuation date to the years
following 1989, lease income from the Partnership Properties
would likely increase and the Partnership Properties would likely
increase in value. Respondent's expert estimates gross lease
income for the first year of $16,345,491 and increases this
figure by 5 percent per year over a projected 12-year period,
with a 1-percent contingency loss reserve to reflect vacancies
and collection losses. Respondent's expert also estimates that
operating expenses in the first year of his analysis would equal
$6,920,501, and respondent's expert increases estimated operating
expenses by 5 percent per year in his cash-flow analysis.
Respondent's expert then capitalizes his 12-year cash-flow
projection using a capitalization rate of approximately 7.9
1(...continued)
Partnership -- one individual inherited 62.5 percent of the unit
and the other inherited 37.5 percent. In July of 1989, for
reasons not made clear in the record, the first individual sold
to Mr. Silver his 62.5-percent interest in the ownership unit for
$125,000. The record is incomplete with regard to significant
aspects of this transaction.
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