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valuation process." In petitioners' view, because the Dutcher
appraisal computed the value of petitioners' intangible assets as
being essentially the discounted present value of SWMG's "future
distributable earnings" (less the value of tangible assets and an
amount for implied working capital), and those future earnings
were net of physician compensation expense and all other
operational expenses, the amount claimed as a contribution for
intangible assets should not be offset by physician salaries or
any other benefit petitioners received in connection with their
providing services to SMF. The "value of the physicians' future
salaries is already netted out of the value of the contribution",
petitioners argue.
We disagree. First, we do not believe the Dutcher appraisal
fully accounts for petitioners' compensation from SMF. Presumably
because SWMG was newly formed and there existed no historical data
on its physician compensation expense, Mr. Dutcher assumed when
computing future distributable earnings that SWMG's physician
compensation expense (computed as a percentage of revenue) would
be equal to the median physician compensation expense for the
medical specialties comprising SWMG, or 45.18 percent of revenue.
In fact, SMF agreed to pay compensation to the SWMG physicians of
at least 47 to 55.75 percent of revenue. Moreover, because Mr.
Dutcher treated SWMG's physician compensation expense as equal to
the 45.18 percent median, his computation of physician
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