-215-
securities to Generale Bank’s and CLIS’s preferred interests, it
was unlikely that any value from the Carolco securities would go
to SMP or the Ackerman group.
5. Net Operating Losses
The parties agree that the unused NOLs in SMHC might have
had some potential, but speculative, value to an acquirer of that
company; however, we have no reasonable basis upon which to
determine what that value, if any, might be.160 Any value that
might exist in the NOLs was highly dependent on the acquirer’s
meeting the requirements of section 382, which limits the amount
of taxable income that might be offset by NOLs in the case of an
“ownership change”. Moreover, even if these requirements had
been met and the NOLs had been preserved, SMHC would have had to
have generated sufficient taxable income against which to use the
NOLs. As of December 11, 1996, without additional
capitalization, this prospect was, for the most part,
unrealistic.
160 Petitioner submitted the expert report and testimony of
Todd Crawford of Deloitte & Touche. Mr. Crawford opined that the
NOLs might have had a value in the range of $620,000 to
$1,245,000, after applying a 98- to 99-percent risk-related
discount. Mr. Crawford admitted at trial that his valuation was
subjective and speculative. For the reasons discussed infra, we
conclude that Mr. Crawford’s analysis is unreliable and not
admissible into evidence.
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