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testified that he would be hard pressed to spend $50,000 each
year on capital expenditures--that $100,000 would replace all of
the lettershop division’s assets.
Respondent’s projections were based on Mr. Rhoads’s
statements and the above operational history, and we find
respondent’s projections reliable and probative of ZSI’s value.
On the other hand, the record does not support petitioner’s
arguments or projections, and petitioner has failed to persuade
us that ZSI’s future capital expenditures will be tailored to
match ZSI’s book depreciation. We therefore accept respondent’s
projections regarding capital expenditures.
III. Nonoperating Asset
The last item we consider is the nonoperating asset held by
ZSI and listed on ZSI’s 1992 balance sheet at a value of
$170,316. Respondent included the nonoperating asset’s value
(rounded to $170,000) in his final valuation of ZSI. We surmise
from the single paragraph petitioner devoted to this issue that
although petitioner initially omitted the nonoperating asset’s
value from his valuation analysis, he now concedes that the value
should have been included but argues that the value of the
nonoperating asset must be offset by a $150,000 debt owed by ZSI
to a stockholder. Petitioner’s argument is rooted in
petitioner’s testimony that the $150,000 debt was payable by ZSI
to petitioner and that during 1992 ZSI purchased the nonoperating
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