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Valuation by Reference to the Partnership Units
The partnership units were publicly traded on the Pacific
Stock Exchange. There were approximately 1.2 million partnership
units outstanding. During the first 20 days following
commencement of "when issued" trading, the aggregate trading
volume was 116,892 units, or 9.7 percent of the number of units
outstanding, and the weighted average trading price of the units
was approximately $11.50 per unit.
Petitioner argues that the value of the Washington assets
held by the Partnership must be determined by reference to the
partnership unit prices set by the market. Thus, according to
petitioner, the Partnership's assets had an aggregate fair market
value on December 20, 1985, of approximately $41.5 million based
on the sum of (1) the aggregate public trading price of the units
(i.e., 1.2 million units x $11.50 per unit, or $13.8 million) and
(2) the initial indebtedness of the Partnership ($27.7 million).
Furthermore, petitioner argues that the unit price does not
represent a discount from the liquidation value of the
partnership, because with a publicly traded company, there is no
difference between the aggregate trading value of the units and
the amount produced by subtracting the entity's liabilities from
the fair market value of its individual assets.
To support its position, petitioner introduced the reports
and testimony of two expert witnesses, Professor Michael Bradley,
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