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agree to extend the assessment period, triggering the issuance of
the notices of deficiency before respondent’s receipt of complete
information. The pretrial and trial dialogue in these cases was
contentious. The parties’ representatives gave no ground on any
point and protracted the trial and pretrial activity.
The trademark sale adjustments and royalty deficiency notice
determinations were developed by respondent’s economist, Nicholas
Baran (Baran). This was Baran’s first IRS examination, and he
had never previously valued a trademark. His prior experience
with discounted cash-flow analysis related to bank loan
portfolios.
Baran determined a worldwide value for the DHL trademark of
$516,520,000 as of 1990 and $601,380,000 as of 1992. Baran
valued the 1990 DHL trademark rights at $289,300,000 for domestic
and $227,220,000 for foreign. Baran valued the 1992 DHL
trademark rights at $350,870,000 for domestic and $250,510,000
for foreign. He valued the 1990 through 2004 DHL domestic
trademark rights at $140,800,000, and valued those same rights
beginning in the year 2005 at $148,500,000, as of 1990. Baran
valued the 1992 through 2006 DHL domestic trademark rights at
$170,370,000, and he valued those same rights beginning in the
year 2007 at $180,500,000 as of 1992.
Baran considered a royalty rate in a license agreement
between DHLI and a controlled subsidiary as a standard for use in
valuing the DHL trademark. He used a 3-percent royalty rate for
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