Michael T. Caracci and Cindy W. Caracci, et al. - Page 41




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          declared that bonus, they would have reported nontaxable income             
          of approximately $1,785,000, or, in other words, more than enough           
          to eliminate the accumulated deficit in net asset value.                    
               The Sta-Home tax-exempt entities’ expert also reported that            
          their total payroll for 1995 was $34,600,000, or about 80.5                 
          percent of operating expenses, and that this amount of employee             
          compensation was “generous”.  A common range of compensation for            
          other home health care agencies was between 70 and 75 percent.              
          Had petitioners not declared the last bonus, their compensation             
          expense would have been $34,085,914, or 75.4 percent of operating           
          expenses.  This amount would have exceeded the industry average             
          and still enabled the companies to eliminate their accumulated              
          deficit and show a modest profit.  Thus, even though the Sta-Home           
          tax-exempt entities reported a history of losses, they at least             
          had the potential to generate income and thus demonstrate a                 
          substantial fair market value.                                              
               We believe that the best evidence of the value of the Sta-             
          Home tax-exempt entities arises from the use of the comparable              
          value method employed by both experts.  We also are persuaded               
          that the fair market value is best determined by relying upon the           
          rationale of Wilhoite.  His use of the MVIC approach to compare             
          the privately held Sta-Home tax-exempt entities to similar                  
          publicly traded businesses is especially appropriate here.  That            
          approach harmonizes the differences between debt and equity usage           






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