Estate of George C. Blount, Deceased, Fred B. Aftergut, Executor - Page 77

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          1976-328.  As we stated in Estate of Gillet v. Commissioner,                
                    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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