Pope & Talbot, Inc., & Subsidiaries - Page 20

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          petitioner’s expert, treated such timber as merchantable.  We               
          note that almost 50 percent of petitioner’s timber fell within              
          the 40-49 age classification.                                               
               We find Mr. Granvall’s approach to be inconsistent.  For               
          timber up to 39 years old, Mr. Granvall "grew" it to age 50 and             
          discounted it to present value, but for timber between 40 and 49            
          years, he harvested it immediately.  This timber, if held to age            
          50, would net a higher profit.  We think that a hypothetical                
          buyer would consider this economic opportunity and value the                
          timber accordingly.                                                         
               Finally, the parties agree that some portion of petitioner’s           
          undeveloped land had a higher and better use as something other             
          than timberland; however, they disagree as to the amount of such            
          property.  The parties refer to this "higher and better use"                
          property as transitional, or development, property.                         
               In 1968, petitioner formed Pope & Talbot Development for the           
          purpose of dealing in real estate sales.  Petitioner often sold             
          or contributed property to Pope & Talbot Development that                   
          petitioner’s management had determined was potentially                      
          developable and was more valuable as development property than as           
          timberland.  In 1985, Pope & Talbot Development held                        
          approximately 17,000 acres.  The most recent transfer of 13,500             


          10(...continued)                                                            
          referred to as "reproduction".  To simplify the comparison of the           
          reports of the two experts, we refer to all premerchantable                 
          timber as "reproduction".                                                   




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