Estate of Marcia P. Hoffman, deceased, Elisabeth Hoffman, Personal Representative - Page 40




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          WLI’s activities were reported individually for 1991 and 1992 for           
          financial purposes.  Mr. Mitchell testified that he did not                 
          adjust WLI’s net earnings for intercompany profits for 1991 and             
          1992, despite acknowledging that there were intercompany profits            
          for those years.35  Mr. Mitchell explained that he used the                 
          earnings figures for 1991 and 1992 that were in the audit of WLI            
          and that this information is what a shareholder would rely on.              
          He testified that intercompany profits from a related entity                
          should not be eliminated from earnings unless it is assumed that            
          such profits would not continue in the future.                              
               Mr. Mitchell agreed that WLI had intercompany profits for              
          1991, 1992, and 1993, from transactions with SCC and affiliates             
          and that it is possible that such transactions could result in              
          the undervaluation of SCC.  If SCC is undervalued as a result of            
          the transactions with WLI, then it is possible that the                     
          intercompany transactions increasing the profits of WLI could               
          result in the overvaluation of WLI.  After reviewing all the                
          evidence in the record, we find that respondent has not                     
          established that the intercompany profits did not distort the               
          value of WLI for 1991, 1992, and 1993, and we are not willing to            
          rely solely on Mr. Mitchell’s assumption that any intercompany              

               35In his valuation report, Mr. Mitchell identified sales of            
          lots and bulk parcels of lands made by WLI to SCC and affiliates.           
          According to Mr. Mitchell’s report, the difference between the              
          sales prices and the costs of the properties was $665,247 for               
          1991 and $788,042 for 1992.                                                 





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