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because accounting rules require the asset side and the liability
side of a company’s balance sheet to be equal. His calculated
MVIC, which comprised long-term liabilities and owners’ equity,
did not include current liabilities. Wilhoite reasoned that, by
adding the known current liabilities to the MVIC, he would
complete the liability side of the balance sheet. The asset
sheet would thus be an amount that equaled the liabilities so
computed. He compared the inclusion of current liabilities as a
means of ascertaining value by showing that petitioners had done
essentially the same operation. Their position was that the
companies’ value was equal to the total liabilities, both long-
term and short-term debt. The difference between Wilhoite’s view
and that of petitioners is that Wilhoite concluded, on the basis
of his MVIC analysis, that the companies had some value, which
was expressed on the liabilities side as owners’ equity.
Petitioners, however, maintained that there was no owners’ equity
and, hence, they did not include it in the balance sheet. His
explanation stated:
Basic accounting requires that the total asset value of
an entity (i.e., the “left-hand side” of the balance
sheet) is equal to the sum of the total liabilities and
equity, or net asset value, of an entity (i.e., the
“right-hand side” of the balance sheet). * * * [The
Sta-Home for-profit entities] and the Caraccis reported
acquired all of the assets of the tax-exempt agencies
by assuming all of the liabilities of the tax-exempt
agencies. Because the Caraccis assumed no equity value
existed, and because basic accounting requires that the
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