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believe respondent is correct in arguing that the trust funds
would have some value to a purchaser of an interest in the
housing partnerships, as the existing funds could eventually be
used to defray expenses that the partnerships would otherwise
incur. However, viewed from this perspective, the funds would
have to be discounted to present value, because the circumstances
and timing for their use are subject to strict controls. The
appropriate discounting would vary with each fund, depending upon
the terms governing its use; and the record in this case provides
an insufficient basis on which to estimate such discounting.
In these circumstances, we think the trust funds are best
viewed as analogous to working capital. The trust funds had to
be maintained by the partnerships in order to retain the HUD
subsidies. The funds were thus essential to producing the above-
market rental income stream earned by the partnerships, not
unlike the working capital necessary for any going concern to
produce an income stream. Since we are valuing the partnerships
as operating businesses, we consider the trust accounts not as
liquid assets (which might be proper if we were considering
liquidation value), but rather as components of working capital,
necessary to continue the income stream of the partnerships, but
otherwise unavailable to an investor in the partnerships.
However, the trust funds have some value to an investor; as
reserves, they make the housing partnerships less risky than
other partnerships similarly situated that do not have such trust
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