Epco, Inc. and Subsidiaries - Page 15




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          there is specific testimony, provided that it is within the range           
          of figures that properly may be deduced from the evidence.  See             
          Anderson v. Commissioner, 250 F.2d 242, 249 (5th Cir. 1957),                
          affg. in part and remanding in part T.C. Memo. 1956-178.  We may            
          also be selective in the use of any portion of an expert opinion.           
          See Parker v. Commissioner, 86 T.C. 547, 562 (1986).                        
               According to Mr. Jones' testimony and his report received              
          into evidence, the fair market value of the sewer line using the            
          capitalization of income method of valuation is $80,000.                    
               Mr. Jones testified that the sewer line generated annual               
          revenue in the amount of $60,912 and that the sewer line's annual           
          operating expenses totaled $43,303.  Based on these figures, Mr.            
          Jones calculated that the sewer line generated annual net                   
          earnings in the amount of $17,609.  Mr. Jones then applied a                
          discount rate of 22 percent because, in Mr. Jones' opinion, a               
          willing buyer would expect a 22-percent return on this investment           
          because of the type of risk involved.  Mr. Jones did not include            
          the $200,000 deposited in escrow or potential tap-on fees from              
          future Pine View customers in his calculations of the proceeds              
          from the sewer line.                                                        
               We have the following reservations concerning Mr. Jones'               
          report:  (1) Mr. Jones contends that the escrow funds, if they              
          have any bearing at all on the valuation of the sewer line,                 
          should be discounted as though they were tap-on fees received               





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