- 14 - knowledge of the market for this type of business, his appraisal approach and methodology are weak in several respects. As an example, for adjusted book value, Mr. Garvin improperly included the $1,254,408 Note Payable. As of decedent’s date of death, that Note Payable had already been converted to equity.3 Consequently, it was not a liability of Harlee, and Mr. Garvin’s adjusted book value should have been substantially larger. In arriving at book value, Mr. Garvin increased other noncurrent liabilities by approximately $1,400,000 from October 31 to December 31, 1995. Mr. Garvin attributes this increase to something he denominates as “negative goodwill”. Negative goodwill has been defined as a phenomenon which occurs when the purchase price of a business is less than its book value. See Adventist Living Ctrs., Inc. v. Bowen, 686 F. Supp. 680 (N.D. Ill. 1988), affd. 881 F.2d 1417 (7th Cir. 1989). In that regard, Mr. Garvin had already discounted Harlee’s assets substantially for “soft” inventory and doubtful accounts. Moreover, he provided no viable reason for further reductions for “negative goodwill”. Mr. Garvin employed established valuation methodologies: Discounted earnings method, guideline company method, and industry market ratios method. However, he duplicated the 3 While this point was conceded by the estate on brief, the estate did not address the change in book and adjusted book value amounts.Page: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 Next
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