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1976-328. As we stated in Estate of Gillet v. Commissioner,
supra:
The segregated approach to valuation [i.e.,
valuing operating assets by capitalizing the income
they generate and then adding in the value of
nonoperating assets] has been accepted by the courts
where the evidence establishes that there was an
accumulation by the corporation of assets in excess of
business needs that would require separate evaluation.
* * * [Citations omitted.]
This same principle holds true where the nonoperating assets in
question are life insurance proceeds to which the corporation
becomes entitled upon the death of the shareholder whose shares
are being valued. See Estate of Clarke v. Commissioner, supra;
see also Estate of Heck v. Commissioner, supra.
In the instant case, the record establishes that BCC had
significant nonoperating assets as of the valuation date,
including an idle asphalt plant, notes receivable, and
substantial amounts of cash in excess of its operational needs
(without regard to the life insurance proceeds). Mr. Truono,
BCC’s chief financial officer, testified that BCC required $1.5
million in cash and cash equivalents to meet operating needs.
Mr. Fodor’s report indicated that BCC had over $2.5 million in
cash and cash equivalents on the valuation date. Mr. Fodor’s
report further revealed that BCC had far more working capital, as
a percentage of revenues, than other companies in similar SIC
groups. Mr. Hitchner persuasively demonstrated that BCC had
significantly more cash and cash equivalents, as a percentage of
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