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expected tax payments resulting from the cashflows attributable
to the intangible asset and (b) the tax benefits resulting from
the amortization of that intangible asset for income tax
purposes.” At trial, Dr. Hakala was asked to read the two
sentences that immediately followed the sentence he quoted in his
rebuttal report: “‘Including the tax affects [sic] in the
valuation is common in the income and cost approaches. It is not
typical in the market approach because any tax benefits would
already be factored into the quoted market price through the
negotiation of market participants during the bid and ask
process.’”
Petitioner’s expert, Mr. Howard A. Scribner,19 testified
that taxes can affect the value of intangible assets but that the
market approach incorporates taxes into the valuation.
Specifically, Mr. Scribner was asked and answered as follows:
Q: Are taxes relevant or irrelevant in a market-
based valuation of an intangible asset?
A: A market-based intangible asset reflects the
interactions of buyers and sellers. All factors,
including taxes, are reflected in those prices.
We agree with petitioner that the market approach of valuing
an asset incorporates the effect of taxes. Respondent’s expert
relied on a source that states that the effect of taxes typically
is not included in the market approach because the quoted market
19 See infra pp. 48-49.
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