Charles A. and Marian L. Derby, et al. - Page 29




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          SWMG physician received payment for the tangible assets of his or           
          her medical practice equal to the appraised value determined by             
          Narvco.  The aggregate amount paid by SMF for the tangible assets           
          of the SWMG physicians' practices was $1,156,733.                           
                    5.  Allocation of Value of Intangibles                            
               SWMG entered into a further retainer agreement with Houlihan           
          on June 14, 1995, pursuant to which Houlihan would provide an               
          opinion "with respect to the appropriateness of the allocation of           
          the intangible value [of SWMG] among the individual shareholders            
          of SWMG pursuant to * * * the Asset Purchase Agreement [APA]                
          between SWMG and Sutter Health."  No such opinion is in the                 
          record.  Earlier, in an October 11, 1994, letter, Houlihan had              
          advised Dr. Silva (chairman of the SWMG steering committee) that            
          an allocation could be made upon one, or a combination, of the              
          following three methods:  On the basis of each physician's                  
          contribution to revenue, on the basis of each physician's                   
          contribution to income, or on the basis of each physician's                 
          roster of active patients.                                                  
               The formula for allocating each SWMG physician's                       
          proportionate share of the estimated intangible value of SWMG was           
          devised, however, not by Houlihan but by one of petitioners;                
          namely, Dr. Levin.  Dr. Levin described his allocation, to be               
          used by each SWMG physician for purposes of calculating his or              
          her charitable contribution deduction arising from the "bargain             







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