- 41 -
property’s adaptability to a particular business.
Stanley Works v. Commissioner, supra at 400 [87 T.C.
389 (1986)]. Acknowledging the existence of such
businesses in the universe of hypothetical buyers also
is consistent with the standard that assets are not
valued in a vacuum but, instead, are valued at their
highest and best use.
Respondent would have us ignore the arm’s-length sale
between petitioner and Chase and instead attempt to estimate some
price of each individual asset, assuming it had value or that
there was a buyer willing to pay more than petitioner.
Petitioner’s evaluation of Rose’s assets was conducted in the
context of an actual transaction where the constraints of the
marketplace were brought to bear on petitioner’s approach to
value.20 In that regard, petitioner’s valuation was also
contemporaneously conducted under actual business conditions, and
we accept it at face. In this situation, there is no need to
conjure up a hypothetical buyer who is ignorant of the facts or
to attempt to place a value on goodwill where it did not exist.
To better understand the differences in value proposed by
the parties, we consider their experts’ reports and approaches.
In reaching our holdings on fair market value, we consider the
expert witnesses’ reports. It is within this Court’s discretion
20 Respondent’s expert concluded that $35 million of the
$181,376,869 MADSP represented goodwill. The facts reflect that
the Rose business was a service business which did not rely on
capital, and its customers were the heart of its value. The Rose
entity was financially troubled and did not have the intrinsic
goodwill of a going concern.
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