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We also reject the Wells report and petitioner’s argument
because they are simply not credible. Neither the Wells report
nor petitioner’s argument reconciles the conclusions reached
regarding the value of the assets contributed to Clinpath
($1,040,000) and the amount of professional goodwill attributable
to the physician-shareholders ($498,000) with what actually
transpired in this case. In an arm’s-length sale negotiated
prior to October 29, 1993, between NHL and the physician-
shareholders who had adverse interests, NHL paid $5,530,000 for
the Clinpath stock and $70,000 for the covenants not to compete
with the seven physician-shareholders. Neither petitioner nor
its expert witness credibly explained how their positions on
valuation reconcile with these facts. The physician-shareholder
who testified at trial did not admit that the covenants not to
compete had been undervalued in the negotiations or agree that
Clinpath’s physician-shareholders had collectively
mischaracterized over $4,000,000 of the amount they received from
NHL as proceeds from the sale of capital assets rather than as
ordinary income attributable to the covenants.
There is a compelling reason why we ordinarily view an
actual and contemporaneous sale between unrelated parties having
adverse interests as the best evidence of the fair market value
of property-–ordinarily, it is credible evidence. See Morris v.
Commissioner, supra. In this case, the relevant sale is even
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