- 49 -
compensation to Jack would be $544,419 for 199515 and $448,620
for 1996, Hakala’s fair market value analysis shows that, what
Hakala referred to as the implied amount of reasonable
compensation would be only $418,290 for 1995, but would be
$461,734 for 1996. In his rebuttal report, in which he concluded
that maximum reasonable compensation to Jack would be $599,117
for 1995 (see supra note 15) and $485,966 for 1996, Hakala’s fair
market analysis shows that, what Hakala refers to as the implied
amount of reasonable compensation still would be only $418,290
for 1995, and $461,734 for 1996.
Hakala’s analysis seems to not make any further use of the
implied amounts of reasonable compensation that he thus
calculated.
As far as we can tell, Hakala uses the three times owners’
discretionary cashflow only in calculating “Operating return
[operating income] on FMV operating assets [which Hakala
apparently equates to three times owners’ discretionary
cashflow]” both in terms of what the ratios actually were and
what the ratios would have been under the method described infra
b. Estimate of Petitioner’s Discount Rate.
As far as we can tell, Hakala uses the five times EBIT only
in one table, which appears twice in Hakala’s original report.
15 For these calculations, Hakala ignored, without
explanation, the additional $5,000 discussed supra (2) Loan
Guaranty.
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