Pope & Talbot, Inc., & Subsidiaries - Page 5

          category of assets making up the Washington properties was as               
          follows:                                                                    

          Timber & timberland       $31.0 million                                     
          Development property       10.5 million                                     
          Port Ludlow community       4.5 million                                     
          Port Gamble townsite        2.5 million                                     
          and tree nurseries                                                          
          $48.5 million                                                               

               The $1.5 million in cash transferred to the Partnership was            
          not included in the assets that we valued.  Furthermore, we did             
          not consider, nor did we intend to include, any portion of the              
          working capital in determining the fair market value of the                 
          Washington properties.  Respondent's Rule 155 computation                   
          correctly treats the $1.5 million of working capital as being               
          separate from the Washington properties that we valued in Pope &            
          Talbot II.                                                                  

          Allocation of Expenses                                                      

               In Pope & Talbot II, we found that petitioner incurred                 
          $1,364,071 in expenses relating to the formation of the                     
          Partnership, the transfer of the Washington properties, and the             
          distribution of the partnership units.  The overall purpose of              
          these activities was to distribute the Washington properties.  We           
          held that petitioner may offset its expenses incurred in                    
          connection with the distribution against its section 311(d) gain.           
          We did not find that these expenses related to either the                   
          transfer of the cash or the separate sale of the installment                





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