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the alternative minimum tax, reduced by certain credits. Net
income tax exceeds the tentative minimum tax only in years when
there is no alternative minimum tax. Thus, the effect of section
38(c) is to limit the use of the investment tax credit to taxable
years for which the company is not liable for alternative minimum
taxes. Likewise, under section 53(c), the alternative minimum
tax credit is available only to the extent that the company’s
regular tax liability (reduced by certain allowable credits)
exceeds its tentative minimum tax, which only occurs when there
is no alternative minimum tax. Thus, section 53(c) also limits
the use of the alternative minimum tax credit to taxable years
for which the company is not liable for alternative minimum
taxes. Accordingly, we find that the hypothetical buyer and
seller would not consider the credits in valuing Dunn Equipment.8
B. Asset-Based Value
The parties agree that the underlying asset values used by
Mr. Frazier are in accordance with Dunn Equipment’s balance sheet
of May 1991. However, as noted above, in calculating net asset
value, Mr. Frazier calculated what he considered liquidation
value. On this basis, he assigned no value to two prepaid
accounts listed on the balance sheet. Further, he reduced his
8 Respondent also argues that the investment and alternative
minimum tax credits should affect Dunn Equipment’s asset-based
value. For the reasons stated above, we reject this argument.
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