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d. Adjustment for Partial Year
The experts also disagree on how to “annualize” the income
from the partial fiscal year from July 1, 1993, through the April
10, 1994, valuation date for purposes of computing average income
for the base period. Mr. Sliwoski extended the partial year
income data pro rata to a full fiscal year, added this amount to
the net income from the previous 5 years and divided the result
by 6. Mr. Kramer, on the other hand, simply added the net income
from the 9.33 months of the partial fiscal year to the income
from the previous 5 years, divided the result by 69.33 months,
and multiplied the result by 12 to compute the average.
The estate finds fault with Mr. Sliwoski’s approach, and we
agree. By simply extending the results of the 9.33 months of the
partial fiscal year pro rata into 12 months, Mr. Sliwoski
effectively postulates level income over each month of the fiscal
year. We agree with the estate that this approach distorts
Renier’s income. The first 9.33 months of Renier’s fiscal year
include the holiday season, a period of high retail volume. The
assumption that the average of the first 9 months of the fiscal
year would be replicated in the last 3 is highly unlikely. In
addition, both sides have conceded that 1994 income was
anomalous, due to the correction of the inventory error. As a
result, we believe a more accurate average is achieved by
averaging the actual results of the first 9.33 months of fiscal
1994 with the preceding 5 fiscal years, as Mr. Kramer has done.
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