- 36 -
There are disputes concerning various aspects of Beck’s
analysis, which we consider in turn.
(a) Accounts Receivable
The first issue to decide is whether it is appropriate to
discount intercompany accounts receivable. Petitioner argues
that the value of certain accounts receivable from Godley Realty
and CPSI should be discounted in valuing the underlying assets of
the housing partnerships. Petitioner’s theory is that
discounting is required to reflect the risk of nonpayment, in
particular because there were no promissory notes or collateral
for the partnerships’ receivables.
We believe petitioner’s argument for discounting the
accounts receivable is unpersuasive. The accounts receivable in
question were not secured because they were from related parties.
Generally speaking, accounts receivable and payable between
related parties are disregarded in a valuation of the commonly
controlled entities; that is, they are either all counted at face
value or all eliminated, producing in either case a wash. Beck,
petitioner’s own expert on valuation of business entities, so
testified. Moreover, Beck valued the accounts receivable of each
housing partnership at face value in his expert report, which
petitioner has submitted under Rule 143(f) in support of its
position. In conformance with the general rule, respondent
allowed the corresponding accounts payable of Godley Realty and
CPSI at full face value in reaching an agreement with petitioner
Page: Previous 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 NextLast modified: May 25, 2011