Leo J. Polack - Page 17




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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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