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The estate discusses notes receivable, leasehold payments,
patents, and royalties. We recount features of these assets and
their valuation as stipulated by the parties, without opining as
to the validity thereof, for purposes of framing the parties’
respective positions. A note receivable represents the promise
of the maker to pay the holder a definite sum of money. Notes
receivable, although exhibiting a wide array of discrete terms
and conditions, generally are the product of an agreement that
provides for a series of payments over a period not necessarily
determined by reference to the holder’s life. Pursuant to
section 20.2031-4, Estate Tax Regs., the fair market value of a
note is presumed to be its unpaid principal amount plus accrued
interest. However, this presumption can be refuted by evidence
that the interest rate, maturity date, collection risk, maker
solvency, collateral sufficiency, or other causes warrant a
lesser value.
A leasehold interest is the product of an agreement
providing for a lessor to receive payment for a lessee’s use of
property. Valuation of the resultant payment stream typically
relies upon an income capitalization approach to discount the
rental installments to present value. Factors considered in
calculating an appropriate capitalization rate include the nature
of the property, the positive and negative physical attributes of
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