Estate of Fred O. Godley, Deceased, Fred D. Godley, Administrator CTA - Page 36




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               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              




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