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in their negotiations which culminated in the 1983 sale.
Additionally, when analyzing petitioner's revenues and expenses
for purposes of the income approach to valuation set forth in his
appraisal, Mr. Shelton states:
Prior to the sale, and at the time when the hospital
was owned by a not-for-profit organization, maximizing
patient revenues per patient day and net income were
not priority matters as they were consumed with their
"totally in-secret plans" to purchase the hospital.
However, the Board did not want to do anything to make
the contemplated sale suspect as the members of the
board covertly made preparations to sell the hospital
to themselves. Thus expenses in the years immediately
prior to and in the year of sale were higher than
normal because of fees and costs related to the
preparation and the related sale expenses.
Finally, in his overall conclusion, Mr. Shelton states that the
Board of Directors of petitioner "covertly schemed and planned
the successful purchase of the hospital to their inurement and at
the expense of this 501(c)(3) corporation".
We think that Mr. Shelton's report is more characteristic of
the work of a revenue agent than of an impartial, disinterested
appraiser. In this connection, we note that Mr. Shelton's report
was received and adjusted by respondent's National Office. We
reject respondent's suggestion that we exclude Mr. Shelton's
objectionable comments and admit the balance of his report.
Those comments impart a pervasive negative impact on the report.
We conclude that petitioner's objection based on bias is well
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