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to the product of the estimated net income and the tax rates in
effect as of the valuation date.
Zitelman made several assumptions regarding the rate of
return a hypothetical buyer would demand. He initially noted
that, as of the valuation date, the rate of return of 30-year
Treasury bonds was 7.9 percent and assumed that the applicable
discount rate would have to be at least between 9.9 percent and
11.9 percent. Zitelman assumed that the discount rate necessary
to achieve an acceptable rate of return required that such a
discount rate should be increased for each of the following
perceived risks: (1) The partnership agreement permits the
general partners to make loans at (a) the prime rate to the
partners for estate taxes, estate administrative expenses, and
medical expenses or (b) the rate at which petitioner borrowed the
funds; (2) there is a likelihood of a disagreement between the
lessee and the partnership as to the future rental rates or the
value of the property; (3) a potential buyer would have to invest
substantial time, energy, aggravation, and cost to evaluate
decedent's interest; (4) the partnership agreement granted the
other partners a right of first refusal; and (5) the potential
buyer did not have control over the partnership's management.
Zitelman concluded that a hypothetical buyer would demand a
purchase price based upon a discount rate between 15.3 percent
and 22.6 percent. Ultimately, Zitelman averaged the present
values calculated based upon these rates and assigned a fair
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