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question of how those proceeds should be taken into account when
valuing BCC. Section 20.2031-2(f), Estate Tax Regs., provides
that “consideration shall also be given to nonoperating assets,
including proceeds of life insurance policies”. As we stated in
Estate of Huntsman v. Commissioner, supra at 874, “it is * * *
obvious that the price paid by a willing buyer would not
necessarily be increased by the amount of the life insurance
proceeds.” Rather, one applies “customary principles of
valuation” to determine the impact of life insurance proceeds on
corporate value. Id. at 876. Here both experts contend that
BCC’s value should be determined using a blend of income- and
asset-based approaches, and the impact of the insurance proceeds
on BCC’s value depends on how those proceeds are treated under
those approaches.
Where a corporation has significant nonoperating assets, one
well-established method of accounting for those assets in an
income-based approach-–and the method proposed by Mr.
Hitchner-–is to add the value of those assets to capitalized
earnings. See, e.g., Estate of Heck v. Commissioner, T.C. Memo.
2002-34; Estate of Renier v. Commissioner, T.C. Memo. 2000-298;
Estate of Ford v. Commissioner, T.C. Memo. 1993-580, affd. 53
F.3d 924 (8th Cir. 1995); Estate of Gillet v. Commissioner, T.C.
Memo. 1985-394; Estate of Clarke v. Commissioner, T.C. Memo.
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