Estate of Lewis A. Bailey, Deceased, Frances Jeanette Foster, Executrix - Page 15

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          stock should be valued on the basis of the adjusted book value of           
          the corporation’s net assets.  In determining the adjusted value            
          of the motels (which make up almost all the assets of C&L                   
          Bailey), they have both used, as a starting point, the Ohrmund              
          appraisal report’s valuation of the California motel and have               
          both adopted the original Biles report’s appraisal value of the             
          Arkansas motel.  They agree that a 20-percent minority interest             
          discount is appropriate and that some additional marketability              
          discount is appropriate.                                                    
               After concessions by respondent,3 the parties and their                
          experts disagree primarily about these three issues:  (1) The               
          value of the California motel at decedent’s death, and in                   
          particular, the effect of decedent’s individual one-half                    
          ownership interest in parcel 2 on the value of his 50 shares of             
          C&L Bailey stock; (2) whether a $145,000 shareholder liability              
          reflected on C&L Bailey’s yearend 1995 corporate books                      
          represented a valid debt that should be included as a negative              
          item in determining C&L Bailey’s net assets; and (3) the total              
          discount that should be allowed in valuing decedent’s 50 shares             
          of C&L Bailey stock.  We address each of these issues in turn.              

               3 Respondent concedes that C&L Bailey’s assets should                  
          exclude certain assets reported on the corporation’s yearend 1995           
          balance sheets; namely, a $16,316 corporate loan to stockholders            
          and a $19,000 franchise fee asset.                                          

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