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companies, and he was unable to provide any type of business
connection between the comparables and Clubside. Furthermore,
Mr. Bishop lacked knowledge of the line of business that some of
the companies were engaged in. Mr. Bishop’s failure to
adequately explain in his report or at trial how the companies
used were comparable to Clubside entitles his findings to little
weight. See, e.g., Estate of Fleming v. Commissioner, T.C. Memo.
1997-484. Overall, the comparable companies used by Mr. Bishop
were riskier in nature and did not accurately reflect the
financial position of Clubside.19
As of the valuation date, the Clubside promissory notes
payable to decedent and Hoffman Associates were unsecured and had
over 17 years remaining until the date of maturity. Interest was
to accrue until the date of maturity; thus, Clubside was not
under any obligation to make interest or principal payments until
January 1, 2012. Clubside had other promissory notes, and there
19Mr. Bishop’s valuation was questionable in another area as
well. Application of a 22.5-percent rate of return to value the
promissory notes produces valuation amounts below those
determined by Mr. Bishop. For example, the $17,022 and $27,358
values determined by Mr. Bishop would have been $12,950 and
$20,813, respectively, based on a 22.5-percent rate of return
over 17 years and 4 months based on maturity values of $436,464
and $701,487, respectively. Application of the values determined
by Mr. Bishop reflects either: (1) A rate of return of 20.58
percent over 17 years and 4 months; or (2) a rate of return of
22.5 percent over 16 years. We note that we have calculated
these figures using basic present value formulae. See, e.g.,
Spera v. Commissioner, T.C. Memo. 1998-225 n.2, supplemented by
T.C. Memo. 1998-299.
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