- 35 -
Timber Property might seek a discount for the less certain
marketability of Johnco's miscellaneous assets, which included a
building, equipment, and a vacant lot and constituted the
remaining 6 percent of Johnco's total net asset value.
Accordingly, Mr. Burns determined that 6 percent should be the
ceiling on any discount for lack of marketability.
c. Built-In Capital Gains Discount
Mr. Burns opposed the application of a built-in capital
gains discount, as such a discount emphasized net proceeds,
rather than fair market value, to a willing buyer. Such an
emphasis, he thought, "is founded on a counter-intuitive premise;
that is, a hypothetical and instantaneous sale of the same assets
which the willing buyer has just purchased." Accordingly, he
considered both the prospect of liquidation and the recognition
of built-in capital gains to be speculative. Mr. Burns noted
that respondent's forester, Mr. Baker, Johnco's former forester,
Mr. Elliott, and even a forester hired by petitioner, Mr.
Screpetis,23 had all concluded that the best use of the Timber
Property was as commercial timberland and that a timber products
company or a pension fund was the most likely purchaser. In
testimony, petitioner's expert Mr. Lax also conceded that the
most likely purchaser was a timber products company or a pension
fund. Thus, Mr. Burns concluded, insofar as a timber products
23 Mr. Screpetis was a consultant forester employed by
George Doyle, Inc., which had been hired by Mr. Buck to appraise
the Timber Property in connection with his valuation of Johnco.
Page: Previous 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 NextLast modified: May 25, 2011