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considered that a hypothetical willing buyer would know of the
existence of the BLA.
Raynor Klaris (Klaris) and John A. Thomson (Thomson) of
Klaris, Thomson & Schroeder, Inc., prepared two appraisal reports
for respondent (respondent’s appraisal). Klaris has been in the
appraisal business since 1961 and is a Senior Accredited Member
of the American Society of Appraisers with a specialty in
business valuations. Thomson has been an appraiser since 1976
and received his Accredited Senior Appraiser designation in
business valuations and intangible properties in 1982. Thomson
is also a real estate appraiser. Both of respondent’s appraisals
assumed that the BLA affected only the University property and
not the Orange County properties. As in Estate of Hall v.
Commissioner, supra, although respondent’s experts were
qualified, they were hindered in their valuation by respondent’s
incorrect instructions regarding the effect of the BLA.
1. The University Property
The parties agree that the undiscounted value of decedent’s
interest in the University property is $1,074,131. Based on the
terms of the BLA, Hillgren held a 25-percent lender interest in
the net proceeds from sale or refinancing of the University
property. The Hoffman appraisal therefore reduced the value of
the University property by 25 percent to represent Hillgren’s
interest. Respondent’s appraisal also reduced the value of the
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