- 34 -
1993. The Wells report, using an indirect method of valuation,
concluded that the value of the clinical business was only
$1,040,000, including the alleged value of corporate goodwill.
Citing our decisions in Norwalk v. Commissioner, T.C. Memo. 1998-
279, and Martin Ice Cream Co. v. Commissioner, 110 T.C. 189
(1998), petitioner contends that the $4,490,000 difference
between the value determined in the Wells report and the purchase
price paid for the Clinpath stock is attributable to professional
goodwill generated by and belonging to its physician-
shareholders.15
We reject the Wells report because it did not value the
property distributed to petitioner’s shareholders as of the date
of distribution as required by section 311. Instead, the Wells
report valued “selected” assets of petitioner as of October 29,
1993, the day before the Clinpath stock was distributed to
petitioner’s shareholders and then sold to NHL pursuant to a
prearranged deal. The Wells report did not consider the
prearranged stock sale to NHL, did not focus on the relevant
date, and did not value the Clinpath stock.
15Petitioner’s expert witness, on the other hand, testified
that the difference between the purchase price paid by NHL and
the value reconstructed in his report was paid for NHL’s own
“synergy”. Petitioner’s expert could not and did not explain why
NHL would pay over $4 million for a synergy NHL allegedly
created.
Page: Previous 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 NextLast modified: May 25, 2011