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reported net income in order to “normalize” it; that is, to
convert Renier’s historical average net income into income that a
hypothetical purchaser could expect in the future, by eliminating
anomalous transactions and capital structures. However, the
experts exhibited significant differences regarding the necessary
“normalizing” adjustments. They also had significant differences
in computing the capitalization rate that should be applied to
normalized income and, to a lesser extent, differences in the
methodology for valuing Renier’s nonoperating assets. The
foregoing differences produced dramatically different results.
Mr. Sliwoski valued Renier’s operating assets at $1,293,760, to
which he added his estimate of the value of Renier’s nonoperating
assets of $553,938,5 for a total value of $1,847,698 on the
valuation date. Mr. Kramer’s income approach, by contrast,
resulted in a value for Renier’s operating assets of $450,104;
i.e., an amount approximately two-thirds lower than Mr.
Sliwoski’s computation. The difference in Mr. Kramer’s estimate
for Renier’s nonoperating assets was not as dramatic; Mr.
Kramer’s estimate was $470,9256 versus Mr. Sliwoski’s $553,938.
5 Although Mr. Sliwoski recognized he had double counted a
liability of $137,038, he did not modify his computations to
correct for this error. Had he done so, Renier’s nonoperating
assets would have increased by $137,038, and its total value
would have equaled $1,984,736. In any event, respondent has not
sought an increase in his deficiency determination in connection
with this error.
6 Unlike Mr. Sliwoski’s value for nonoperating assets, this
(continued...)
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