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based upon the cash-flow of the years 1983 through 1986. Using
the partnership's tax returns and income and expense statements,
he first calculated that an average cash-flow applicable to a
25-percent interest was $341,000 a year. He then concluded that,
because the partners received distributions of only 86 percent of
that cash-flow, a purchaser of a 25-percent interest would
receive $293,000 a year. He thought that a private investor (as
opposed to a forest products company or an institutional
investor) would be the most likely purchaser of the undivided
interest. He concluded that a private investor would capitalize
the estimated $293,000 annual cash-flow at 10 percent and add the
unrealized gain on the buildup of inventory resulting from the
Barges’ saw timber management policies to make a maximum offer of
$3,340,000.
Ebner did not consider that a potential purchaser
unsatisfied with the Barges’ saw timber management philosophy
could force a partition of the property and, thus, escape the
Barge management philosophy. Petitioner agrees that Mississippi
law provides for partition of real property. See Miss. Code Ann.
sec. 11-21-3 (Supp. 1996). If the timberland were partitioned, a
purchaser would pay an amount equal to the present value of
(1) the cash-flow expected under Barge management for the period
until partition (minus the costs of partition, which would be
divided equally over the partition period), and (2) the value of
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