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representative responsible for negotiating the terms of the
Reorganization Agreement believed that the fair market value of
the Securities was $460 million.
Respondent's contention that the fair market value of the
Facilities was $2,099,970,000, although facially plausible, is
not established. Even if correct, however, it does not
necessarily follow that the fair market value of the Facilities
was equal to the fair market value of the stock of the
Subsidiaries owning those Facilities. Nor does it necessarily
follow that the fair market value of the Securities was equal to
the liquidation value of the Preferred Stock.
We find no evidence that the parties to the Acquisition
agreed that the fair market value of the Securities was $460
million. Indeed, on audit, the respondent took a different
position, valuing the Preferred Stock at liquidation value of $50
per share and the Common Stock Warrant at $5.98 per warrant for a
total value for the Securities of $566,093,446. Furthermore, for
financial and tax reporting purposes, neither petitioners nor
HealthTrust adhered to the purported agreed value.
In sum, we think that the cases on which respondent relies
are distinguishable from the facts of the instant case. In each
of those cases one of the parties to an agreement was challenging
a value or characterization agreed upon in the contract. E.g.,
North American Rayon Corp. v. Commissioner, 12 F.3d 583 (6th Cir.
1993); Sullivan v. United States, 618 F.2d 1001 (3d Cir. 1980);
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