- 31 -
$2,547,092, and he estimated that property taxes and interest on
the promissory notes would amount to $250,000 after 3 years. The
net amount, $2,297,092, was the value he determined the
partnership would have after 3 years. Mr. Bishop felt that a
knowledgeable investor would require a 30-percent annual return
on such an investment based on the following assumptions: (1)
The interest was an illiquid minority interest in a family
partnership that would be difficult to market; (2) the only
source of cash-flow would be from the sale of real property, and
no such sales had taken place as of the valuation date; (3) the
holders of the remaining 72.5 percent of the partnership were
related, would manage the affairs in a responsible manner, and
Mr. Hoffman would continue to provide the cash to the partnership
to pay property taxes; and (4) the notes and accrued interest
thereon would total over $2 million by the year 2012, making a
cash return on the partnership equity unlikely. Application of a
30-percent return over 3 years, as adjusted for decedent’s 27.5-
percent interest, yielded a fair market value for decedent’s
partnership interest of $290,582.28
We are not persuaded by the reports and testimony of Mr.
Bishop with respect to the value of decedent’s interest in
Clubside. Mr. Bishop relied on the value assigned to the Cathead
28As we noted earlier, Mr. Bishop testified that he made an
error in his valuation and that the corrected value of the
partnership interest was $289,913.
Page: Previous 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 NextLast modified: May 25, 2011