- 48 -
We find no support in the record for respondent’s
allegations of unduly pessimistic valuation in connection with
the discontinued operations writedowns. Petitioner presented the
expert testimony of Justin A. Gannon, an audit partner in the San
Antonio office of Arthur Andersen LLP, on the propriety of
adopting discontinued operations treatment with respect to
G�nther for FYE May 31, 1992. Respondent stipulated that Mr.
Gannon was an expert in the field of accounting. Mr. Gannon’s
report sets forth the underlying facts in support of his
conclusion that discontinued operations treatment was
appropriate. Respondent did not offer any expert testimony to
rebut Mr. Gannon’s testimony. Our consideration of all the
evidence in this case, including but not limited to Mr. Gannon’s
testimony, convinces us that petitioner’s decision to adopt
discontinued operations treatment was consistent with U.S. GAAP
and appropriate under the circumstances herein.31 Moreover,
petitioner has convinced us that its efforts with respect to
G�nther were directed to minimizing the substantial economic
losses it reasonably anticipated from G�nther’s catastrophic
financial implosion and were not structured to distort its tax
position.
31We note that the value of G�nther’s interest in Actium was
increased as a result of discontinued operations treatment. This
writeup belies respondent's claim that discontinued operations
treatment was undertaken solely to buttress petitioner's claim
that G�nther had become worthless.
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