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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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