Andantech L.L.C., Wells Fargo Equipment Finance, Inc. (f.k.a. Norwest Equipment Finance, Inc.), Tax Matters Partner, and Wells Fargo & Co., A Partner Other Than the Tax Matters Partner, et al. - Page 109




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          approach their estimated salvage value of 1% of list within one               
          year after the announcement.”                                                 
               Additionally, the DMC Residual Value Report for the third                
          quarter 1993 forecast commentary for the IBM 9021 models states               
          that the lack of a list price was bothersome to most users because            
          of the lack of a reference point to begin negotiations.  The report           
          indicates that there also was no list price for the IBM 9121                  
          models.  Thus, at the time of the transaction, IBM no longer                  
          provided list prices and the lack of list prices was not an                   
          unforeseeable event.                                                          
               We think the market forces that resulted in a rapid decline in           
          the value of the equipment were predictable in 1993 and, at a                 
          minimum, should not have been ignored by the appraisers and                   
          petitioners’ experts in estimating the residual values.                       
               The M&S report states that IBM typically introduces a new                
          series (or family) of mainframes every 3.5 to 5 years.  Mr. Page,             
          a vice president of M&S, testified as an expert for petitioners in            
          this case.  His estimate of the residual value of the computers is            
          based upon a chart from a study he prepared for M&S in spring 1993            
          using a 10-year useful life.  His age/life depreciation curve was             
          based upon an annual study that he prepared beginning in 1980 and             
          continuing through 1992.  The data for this study came from the               
          January issues of the “Computer Price Guide” (recognized as the               
          most authoritative source of secondary market information).   In              
          1993 when he prepared the chart, he was aware of the fact that “the           





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