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CMO A-2 99.4511 97.664063 350,000,000
CMO A-3 99.2668 96.390625 435,000,000
CMO C-4 95.6239 94.890625 85,052,100
1 The adjusted issue price is the unpaid principal balance
minus the fraction of any unamortized original issue discount
remaining as of the valuation date. For a debt instrument issued
at a price that equaled its face value and for which there had
been no redemption before Dec. 31, 1984, the adjusted issue price
equals the initial face amount. The adjusted issue price listed
above is the adjusted issue price per $100 of unpaid principal
balance.
2 The Jan. 1, 1985, market price equals the middle price--
this is the average of the bid and asked prices. With the
exception of G-15 and G-16, Professor Schaefer used the average
of the bid prices obtained by Arthur Andersen and petitioner from
the Salomon Brothers, First Boston, Merrill Lynch, and Shearson
Lehman investment banks as the bid price. See appendix. The bid
prices for G-15 and G-16 equaled the average of the available
prices.
We find that petitioner’s method of valuing its favorable
financing intangible assets provides a reasonable estimate of
fair market value. The Supreme Court in Dickman v. Commissioner,
465 U.S. 330, 337-338 (1984), indicated that the value of the
right to use borrowed money is readily measurable by reference to
current interest rates. See also Rev. Proc. 85-46, sec. 3.01,
1985-2 C.B. 507 (stating that the value of a gift below-market
loan is “the difference between the rate at which the money is
loaned and the prevailing market rate.”). Similarly, we believe
that the favorable financing aspect of petitioner’s debt
instruments may be valued by comparing petitioner’s effective
contract interest rates to the prevailing market rates for those
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