T.C. M em o . 2 01 7 -1 1 9

UNITED STATES TAX COURT

W . ZINTL CONSTRUCTION, INC., Pet it i o n er v . COM M ISSIONER OF INTERNAL REVENUE, Res po n d en t

Do ck etNo . 2 1 7 41 -1 4 L. Fi l edJ u n e 1 9 , 2 0 1 7
. Th o m as M
. Reg an , fo r p et i ti o ner. Ch ri st i n a L. Co ok , fo r res p o n d en t.

M EM ORANDUM OPINION PUGH, Ju d g e: Pet i t io n er p et i t i o nedth e Co u rtfo r rev i ew o f res p o n d en t ’ s No t ice o f Det erm i n at i o n Co n cern i ng Co l l ect i o n Act i o n (s ) Un der 6 3 2 0 an d/ o r 6 3 3 0 1 s u s t ai n i n g n o t ices o f i n ten tt o l ev y (l ev y n o t i ces ) an d a n o ti ce o f Fed eral t ax

1 Un l es s o th erwi s e i n d i cat edal l s ect i o n referen ces are t h e In t ern al Rev en u e Co d e o f 1 9 8 6 , as am en d edan di n effect atal l rel ev an tt i m es . Ru l e referen ces are (co n ti n u ed ...)- 2
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[* 2 ] l i enfi li n g wi th res p ectp et i t i o ner’ s o u t s tan d i n g em p l o y m en t t ax l iab i li t i es fro m Fo rm s 9 4 0 , Em

p l o y er’ s An n u al Fed eral Un em pl o y m en t(FUTA) Tax Retu rn , fo r 2 0 1 0 an d 2 0 1 1, an dFo rm s 9 4 1, Em p lo y er’ s Qu art erl y Fed eral Tax Return , fo r th e qu art erl y

p eri o d s en d i n g Decem

b er 3 1, 2 0 10 ; M arch 3 1 , J u n e 3 0 , Sep t em b er 3 0 , an dDecem

b er 3 1 , 2 0 11 ; an dM arch 3 1 an dJ u n e 3 0 , 2 0 1 2 (u n derl y i ng l i ab i l i t i es ). Th e u n d erl y i n g l i ab i l i t i es t o t al ed $ 6 , 5 6 3 ,2 6 3 as o f Sep t em b er 4 , 2 0 1 4
. 2 Th i s cas e i s b efo re t h e Co u rto n cro s s -m o ti o n s fo r s u m m ary ju d g m en t p u rs u an t t o Ru l e 1 2 1 (a). W e are as k eds p eci fi cal l y wh et h er res p o n d en tab u s edh i s d i s cret i o n b y

v al u i n g p et i t i o n er as a g o in g co n cern an d o n t h atb as i s reject i n g p et i t i o n er’ s o ffer i n co m

p ro m i s e (OIC) as s ub s t an t i al l y b el o w p et i t i o n er’ s
reas on ab l e co l lect i o n p o t en t i al (RCP). Back gro u n d Th e fo l l o w i n g fact s are b as edo n th e p art i es ’ p l ead i n g s an dth e p art ies ’
s u m m ary ju d g m en tm o t i o n s , i n cl u d i n g t h e at t ach edaffi d av i t s an d ex h i b i ts
. Pet i t io n er, a C co rp o rat i o n wh ol l y o wn edb y W i l l i am

an dAn n Zi n t l , i s a
co m m erci al co ns tru ct i on s ub co n t ract o r wi th a p ri n ci p al p l ace o f b us i n es s i n

1 (...co n t in u ed ) t o the Tax Co u rtRu l es o f Pract i ce an dPro cedu re.

2 Al l m o n et ary am o u nt s are ro u n d edt o th e n eares td o l l ar.- 3
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[* 3 ] M i n n es ot a. On M ay 2 8 , 2 0 1 3 , res po n d en t s en t a n o t i ce o f i nt en tt o l ev y t o p et i t i o n er wi th res p ectt o i t s em p lo ym en tt ax l i ab i l i t i es fro m : (1 ) Fo rm s 9 4 1 fo r th e qu art erl y

p eri o d s en d i n g J u n e 3 0, Sep t em b er 3 0 , an dDecem

ber 3 1 , 2 0 1 1 ; an d M arch 3 1 an d J un e 3 0 , 2 0 1 2 ; an d(2 ) Fo rm s 9 4 0 fo r 2 0 1 0 an d2 0 1 1. In res p o n s e
o n J u n e 3 , 2 0 1 3 , p et i t i on er s ub m i t t edFo rm 1 21 5 3, Req u es tfo r a Co l l ect io n Du e Pro ces s o r Equ i v al en tHeari n g . OnJ u n e 4 , 2 0 1 3 , res p o n d en ts en ta n o t i ce o f i n t en tt o l ev y

t o p et i t i o n er wi th res p ectt o i t s Fo rm 9 41 u np ai dt ax l iab i l i ty fo r t h e p eri o den d edo n Decem

b er 3 1 , 2 0 1 0 . Inres p o n s e o n J un e 1 3 , 2 0 1 3 , p et i t i o n er
s ub m i t t edFo rm 1 2 1 5 3 . OnJ u n e 1 8 , 2 0 1 3 , res p on d en ts en ta n o ti ce o f i n t en tt o l ev y t o p et i t i o n er wi th res p ectt o i t s Fo rm 9 4 1 u np ai d t ax l i ab i l i ty

fo r t h e p eri o d
en d edo n M arch 3 1 , 2 01 1 . Inres p o n s e o n J u l y 1 6, 2 0 1 3 , p et i t i o ner s ub m i t t ed Fo rm 1 2 1 5 3 . Onal l Fo rm s 1 2 1 5 3 p et i t io n er ch eck ed“ o ffer i n co m pro m i s e” as a
co l l ect i o n al t ern at i v e an dwro t e “ W e b el i ev e t h ati ti s p rem atu re t o t ak e co ll ect i o n act i on i n th i s m at t er. An Offer i n Co m p ro m i s e i s an ap pro p ri at e co l l ect i o n al t ern at i v e.” Ona Fo rm

6 5 6, Offer i n Co m

p ro m i s e, s ubm i t t edo n Au g u s t2 7 , 2 0 1 3 , p et i t i o n er m ad e an OIC o f $ 1 m i l l i o n . Ins upp o rt th ereo f p et i t i o ner p ro v i d eda p ro fi t an dl o s s s t at em en t an d a b al an ce s h eeten d i n g J u n e 3 0 , 2 0 1 3 , an da Su m m ary Ap p rai s al Rep o rtb y

Ho ff Ap p rai s al As s o ci at es d at edFeb ru ary 1 2 ,- 4
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[* 4 ] 2 0 1 3 , i n d i cat in g a “ Fo rcedLi qu i d at io n Val u e” fo r p et i t i on er’ s m ach i n ery an d equ ip m en to f $ 1 ,1 5 5 ,0 0 0 . Inan acco m pan y i n g l et ter t o Set t l em en tOffi cer (SO) Al b ri g h t, p et it i o n er i nd i cat edan acco un t s recei v ab le b al an ce o f $ 3 ,3 59 ,9 2 0 as o f Au g u s t9 , 2 0 1 3 . Aft er q u ot i n g th e In t ern al Rev en u e M an u al (IRM ) reg ard i n g th e p ro p er treat m en to f acco u nt s recei v ab l e, th e l et t er ex p l ai n ed that“ Zi n t l i s p ro fi tab le an d i t s recei v ab l es are p arto f t h e i nco m e s tream req u i redfo r t h e p ro duct i o n o f i n co m e. Th e co m p an y m u s tp ay fo r m at eri al s an dl ab o r t o co n t i n u e
o p erat i n g . W i th o u t th e i n co m e fl o w fro m th es e recei v ab l es th e b u s i n es s co u l dn o t
o p erat e.” Pet i t i on er al s o ex p l ai n edth at“ [t ] h e l i qu id at i o n o f Zi n t l ’ s i nv en to ry , m ach i n ery , an dequ i pm en two u l den di t s ab i l i ty t o o p erat e. Zi n t l recen t l y s o l dal l
o f t h e as s et s i tco u l ds p are t o s at i s fy an o b l i g at io n t o Ci ti zen s St at e Ban kth atwas
s ecu redb y

i t s i n v en t ory

an d eq u i p m en t .” SO Al b ri g h t req u es t edad d i t i on al d o cu m en t at i on , i n cl u di n g a v al uat i o n o f th e b u si n es s as a g o i n g co n cern an d a co p y o f t he eq u i p m en tap p rai s al l i s t i n g th e fai r m ark etv al u e o f p et i ti o n er’ s p hy s ical as s et s . Pet it i on er s en tth e d ocu m en t s req u es t ed , i n cl u d i n g a g o i n g -co n cern ap p rai sal p rep aredb y Sh en eh o n Co . d at ed Ap ri l 1 6 , 2 0 14 . Th e g oi n g -co n cern ap p rai s al es t i m at eda g o i n g -co ncern fai r
m ark etv al u e o f $ 2 , 1 0 0 ,0 0 0 , u s i n g th ree v al u at i o n m et h o d s , each o f wh i ch
s ub tract ed accru edp ayro l l t ax l i ab il i ty an di nt eres to f $ 4 ,1 9 0 ,2 9 0 . Th e l arg es t- 5
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[* 5 ] s i ng l e as s et refl ect edi n th e ap p rai s al was th e acco u n t s recei v ab l e (i n ex ces s
o f $ 7 m i l l i o n at th e en do f p et i t i o n er’ s fi s cal y ear en d i n g J anu ary 2 0 1 4 3 ), an dth e l arg es ts i n g l e l i ab i l i ty

was th e p ayro l l t ax l i ab i li ty . Th e ap p rai s al d i dn o ti n cl u d e th e accu m

u l at ed p en al t i es o n th e t ax l iab i l i ty (es t i m at edt o b e $ 2 ,1 01 ,7 2 3 ). Th e ap p rai s al as s i g nedn o v al u e t o g o o dwi l l . Th e ap p rai s al al s o es t i m at eda l i qu i dat i o n v al u e fo r t h e co m p an y o f n eg at i v e $ 3 , 7 2 0 ,0 0 0
. In a l et t er d at ed Ap ri l 2 4 , 2 0 1 4, SO Al bri g h t res p o n ded : [Th e] ap p rai sal es ti m at edth e v al u e o f t h e b u s i n es s t o b e $ 2 ,1 0 0 ,0 0 0 aft er al l o wi n g fo r t he IRS d eb to f $ 4 ,1 9 0 , 9 8 0 . Ino ther wo rd s th e v al u e o f t he b u s i n es s fo r p u rp o ses o f t h e OIC i s es t i m at edt o b e $ 6 ,2 9 0,9 8 0 . In det erm i n i n g th e reas o n ab l e co l l ect i on p o t en t i al i n an OIC, t h e IRS wo u l dg en eral l y reduce t he as s etv al u es b y 2 0 %. As a res u lt , i n th is cas e t h e reas o n ab l e co l l ect io n p ot en t i al i s co m p ut edt o b e $ 5 ,0 3 2 ,7 8 4 ($ 6 ,2 9 0 ,8 9 0 x .8 ). SO Al b ri g h t g av e p et i ti o n er an o p p ortu n it y t o s ub m itan am en dedOIC “ i n
an am o u n tatl eas tequal t o t h e reas o n ab l e co l l ect io n p ot en t i al ” an ds t at edth ath e l i kel y wo u l drejectth e o ri g in al $ 1 m i l l i o n o ffer i f an am en d edo ffer were n o t recei v edb y

M ay 8 , 2 01 4 . By

l et t er d at edM ay

1 , 2 0 1 4 , p et i t i o n er d is ag reedwi t h

3 Th e recei v ab l es fi g ure i n cl u dedo v er $ 4 .8 m i l l i o n i n recei v ab l es fo r p ro ject s t h at were n o ty etco m pl et ed . Th e ap p rai s al as su m edth at co ll ect i n g th es e recei v ab l es , fo r p ro

ject s n o ty etco m

p l et ed , wo u l db e d o ub t fu l an dth erefo re redu ced th e acco u n t s recei v ab l e b y th i s am ou n twh en cal cu l at i n g the l i qu id at i o n v al u e o f p et i t i o n er.- 6
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[* 6 ] th e “ u s e o f t h e g o i n g co n cern v al u at i o n o f Zi n t l t o cal cu lat e an accep t ab l e Offer i n Co m

p ro m i se am o u n t”. OnJ u ne 1 7 , 2 01 4 , SO Al b ri g h ti s s ued p et i t io n er a l et t er s t at in g th ath e h ad

“ b een u n ab l e t o fi n d an yth i n g t o i n d i cat e t hatth e g o i ng -co n cern v al ue can n o tb e
u s ed in d et erm in i n g th e RCP wh en th e t ax p ay er i s a b u si n es s (as o p p o s edt o wh en th e t ax p ay er i s the s h areh o ld er o f a b u s i n es s )”. Th e l et ter ad v i s edp et i t i o n er t h at
an y OIC h adt o co v er al l o f t he t ax o wedan datl eas ts o m e o f t h e p en al t i es an d i n t eres tan dex p l ai n edth e b as i s fo r t h i s co n cl u si o n (rel at in g t o the g ro wth o f t h e b u s i n es s o v er t h e p eri o dthe b us i n es s was d el i n qu en t o n i t s t ax o bl i gat i o ns an dth e
en h an cedg o i n g-co n cern v al u e du e t o th i s g ro w th ). SO Al b ri g htcal cu l at edth e
u np ai dt ax es t o b e ap p ro x i m at el y $ 3 ,6 66 ,0 0 0 an dthe t o t al l i ab i l i ty , wi th p en al t i es
an d i n teres t , t o b e $ 6 , 4 2 3 , 0 0 0 . Fi nal l y h e ad v is edp et i t i o n er t h at i f i t wan t edt o
am en dthe OIC t o refl ectth e co m p u t edRCP o f $ 5,0 3 2 ,7 8 4 i ts h o u l d s ub m i tan
am en d edFo rm

6 5 6 b y J u l y 1 , 2 0 1 4
. In a J u l y 9 , 2 01 4 , m eet i ng an ds ubs equ en tcal l s p et i t i o n er ad vi sedSO Al b ri g h t th ati twas u n ab l e t o s ecu re fi nan ci n g t o fu n da $ 5 m i l l i o n OIC b u twas
co n ti n u i n g t o wo rk wi th b an k s o n fi n an ci n g . On Au g u st4 , 2 0 1 4 , p et i t i o n er’ s at t o rn ey n o t i fi edSO Al b ri g h t th at p et i t i o n er an t i ci pat edrecei v i ng a l o ano f $ 3
m i l l io n thati f ap p ro v edwo u ldal l o w p et i t i o n er t o i n creas e i ts OIC t o $ 3 , 2 0 0 ,0 0 0
.- 7
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[* 7 ] In th e Cas e Act i v i ty

Reco rdSO Al b ri gh tn ot ed , am on g o th er co n cern s, th at th e d ead li n e fo r i n creas i ng th e OIC h ad l ap s edan dth e l oan h adn o t y etb een ap p ro v ed . SO Al b ri g h t i n d i cat edth ath e h ada n u m b er o f o th er reas o n s fo r reject i n g p et it i on er’ s OIC o n p ub l ic p o l i cy g ro u n ds b u t wo u l d reco m m en d reject i o n b as edo n RCP rat h er t h an p ub l i c p o l i cy . OnAu gu s t1 1 , 2 0 1 4, res p o n d en ti s s u eda n o t i ce o f d et erm in at i o n reject i n g p et i t i o n er’ s o ffer o f $ 1 m i l l i o n b ecau s e i t s RCP ex ceed edth atam o un tan d
s u s t ai n i n g t h e d i s pu t edco l l ect i o n act i o n s . Di s cu ss i o n I. Su m m ary J u d g m en t Ru l e 1 2 1 (b ) p ro v i d es i n p artth ataft er a m o t i o n fo r s u m m ary ju d g m en tan d
an o p p o s i n g res po n s e are fi l ed , “ [a] d eci s i o n s h al l * * * b e ren d eredi f t h e p l ead i n g s * * * an d an y

o th er accep tab l e m at eri al s , t o g et h er wi th th e affi d av i t s o r d ecl arat io n s , i f an y , s h o w thatth ere i s n o g en u i ne d i s p ut e as t o an y m at eri al fact
an d th ata d eci s i o n m ay

b e ren d eredas a m at t er o f l aw.” Su m m ary ju dg m en ti s i n t en d edt o ex p ed i t e l i t i g at i o n an dav o i du nn eces s ary an d ex pen s i ve t ri al s . Fl a. Peach Co rp . v . Co m

m is s i o n er, 9 0 T.C. 6 7 8 , 6 8 1 (1 9 8 8 ). Th e p art i es ag ree t h at th ere are n o d i s p u t ed m at eri al fact s an dth erefo re s u m m ary ju d g m en ti s ap p ro p ri at e.- 8
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[* 8 ] II. An al y s i s Wh ere (as h ere) t here i s n o d i s p u t e as t o th e t ax p ay er’ s u n d erl y i n g l i ab i l i t i es , we rev i ew t he Ap peal s Offi ce’ s d et erm i n at i o n fo r ab us e o f d i s cret i o n . Go za v . Co m

m i s s io n er, 1 1 4 T.C. 1 7 6, 1 8 2 (2 0 0 0 ); s ee al s o Seg o v . Co m m i s s i o n er, 1 1 4 T.C. 6 0 4 , 6 0 9 -6 10 (2 0 0 0). An ab u s e o f d i s cret i on ex i s ts wh en a d et erm i n at i o n i s arb i trary , cap ri ci o u s , o r wi th o u t s ou n db as i s i n fact o r l aw. See M u rp h y v . Co m m i s s i o n er, 1 2 5 T.C. 3 0 1 , 3 2 0 (2 0 05 ), aff’ d , 4 6 9 F.3 d2 7 (1 s tCi r. 2 0 0 6 ). W e d o n ots ub s t i tu t e o u r ju d g m en t fo r th ato f t h e s et t l em en to ffi cer as t o th e accep t ab il i ty

o f a p art i cu l ar o ffer. See, e.g ., J o hn s on v . Co m m i s s i o n er, 1 3 6 T.C. 4 7 5 , 4 8 8 (2 0 1 1 ), aff’ d , 5 0 2 F. Ap p’ x 1 (D.C. Ci r. 2 0 1 3 ). If t he s et t lem en t
o ffi cer fo l l o w s al l s t atu t o ry an dad m i n is trat i v e g u i d el i n es an dp ro vi d es a reas o n ed , b al an cedd eci s i o n , th e Co urt wi l l n o trewei g h th e eq u i t i es . See Fi ft y Bel o w Sal es & M k t g ., In c. v . Un i t ed St at es , 4 9 7 F.3 d8 2 8 , 8 3 0 (8 th Ci r. 2 0 0 7 ). Gen eral l y , th e
s et t l em en to ffi cer d o es n o tab u s e h i s o r h er d i s cret i o n b y reject i n g an o ffer i n
co m p ro m i s e i n acco rd an ce wi th th e g ui d el i n es s etfo rth i n the IRM
. See Ven ezi an o v . Co m

m i s s i on er, T.C. M em o . 2 0 1 1-1 6 0 (fi n d i ng th at s et tl em en t
o ffi cer d idn o t err i n fo l l o wi n g IRM g u i d el i n es an dd et erm i n i n g th att ax p ay er d i d
n o tqu al i fy

fo r OIC b as edo n effect i ve t ax ad m i n i s trat i on o r d o ubtas t o
co l l ect i b i l i ty

wi th s peci al ci rcu m s t an ces ); Sch u lm an v . Co m m i s s i o n er, T.C.- 9
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[* 9 ] M em o . 2 0 0 2 -1 2 9 (up h o l d i n g a s et t l em en to ffi cer’ s p ro p o s edm o n th l y i n s t al l m en tp aym en t co m p ut edu n d er IRM g ui d el i n es ). Sect io n 7 1 2 2 (a) au th o ri zes th e IRS t o co m p ro m i s e an o u t st an d in g t ax l i ab i l i ty , b as edo n d o ub tas t o co l l ect i b i li ty . Sec. 3 0 1 .7 1 2 2-l (b ), Pro ced . & Ad m i n . Reg s. Do ub tas t o co l l ect i bi li ty ex i s t s i n an y

cas e wh ere t h e t ax p ay er’ s as set s an d i n co m e are l es s t h an th e fu l l am o u n t o f t h e l i ab i l i ty . Id
. s ubp ara (2 ). Gen eral l y , an OIC wi l l b e accep t edi f i t i s u n l i k el y th atthe t ax can b e co l l ect edi n fu l l an dth e OIC reas o n ab l y

refl ect s th e am o u n tth e IRS co u l d co ll ectth ro ug h ad m i n i s trat i v e
an d ju d i ci al co l l ect i o n rem ed i es . See Rev . Pro c. 2 0 0 3 -7 1 , s ec. 4 .0 2 (2 ), 2 0 03 -2 C.B. 5 1 7 , 5 1 7 . Ab s en ta s h owi n g o f s p eci al ci rcu m s t an ces , s et t l em en to ffi cers are d i rect ed t o rejecto ffers s ub s t an t i al l y b el o w th e t ax pay er’ s RCP wh en the OIC i s p rem i s edo n d oub tas t o co l l ect i b i l i ty . Id . Th e m ai n co m p o n en t s o f a t ax p ay er’ s RCP are real i zab l e n etequ i ty i n th e t ax p ay er’ s as s et s an dth e t ax p ay er’ s n etfu ture i n co m e. See J o hn s o n v . Co m m i s s i o n er, 1 3 6 T.C. at 4 8 5 ; IRM p t. 5
. 8 .1 1
. 2 (Au g . 5 , 2 0 1 5 ). Th e o n l y i s s u e i n d i s p u te i s wh et h er SO Al b ri g htab u s edh i s d i s cret i o n b y
u s i n g th e g o i n g -co ncern v al u e as d es cri b edi n IRM p t . 5 .8 .5
. 1 7 (Sep t . 3 0 , 2 0 1 3 ) t o cal cu l at e p et i t io n er’ s RCP as th atwas the o n l y reas on g i v en i n th e n o ti ce o f d et erm i n at i o n fo r reject in g p et i t i o n er’ s OIC. W e t h erefo re m u std eci d e wh et h er- 1 0 -

[* 1 0 ] SO Al b ri g h t’ s cal cu l at i o n o f RCP was reas o n ab l e. See J o h n s o n v . Co m m i s s i o n er, 1 3 6 T.C. at4 8 6. IRM p t . 5 .8 .5 .1 7 s t at es , as rel ev an t: 1 . Ev al u at i on o f a b u s i n es s as a g o i ng co n cern i s s om et i m es n eces s ary wh en d et erm i ni ng RCP o f an o p erat i n g b u s i n es s o wn edi n d i v i du al l y o r b y a co rp o rat i o n , p art n ers h i p , o r LLC. Th i s an al y s i s reco g n i zes th ata b u s in es s m ay

b e wo rt h m o re t h an th e s um o f i t s p art s , wh en s o l das a g o i n g co n cern . 2 . To d et erm i n e t h e v al ue o f a b u s i n es s as a g oi ng co n cern co n s i d er th e v al u e o f as s et s , fu tu re i n co m e, an di n t an gi b l e as s et s s u ch as : - Ab i l it y o r rep u tat i o n o f a p ro fes s i o nal
. - Es t ab l i s h edcu st o m er b as e. - Pro m i n en tl o cat io n . - W el l kno wntrad e n am es , trad e m ark s , o r t el ep ho n e n u m b er. - Po s s es s i o n o f g o v ern m en tl i cen ses , co p yri gh t s, o r p at en t s . Gen eral ly , th e d ifferen ce b et ween wh atan o n g oi n g b u s i nes s wo ul d real i ze i f s o l d on th e o p enm ark etas a g oi n g co n cern an dthe trad i t i o n al RCP an al y s i s i s at tri b u t ab le t o th e v al u e o f t h es e i n t an g i b l es . * * * * * * 5 . Gen eral l y , th e v al u e o f a b u s i n es s as a g o i n g co n cern wo u l dn o tb e i n cl u d edi n RCP o f a v i ab l e, o n g o i n g b u s i n es s, u nl es s th e v al u e i s s ub s t an t i al l y

g reat er t h an th e i n co m e p ro du cedb y the b u s in es s . Pet i t i o ner co n ten d s th atth e g o i n g -co n cern v al uat i o n m eth o d i n IRM p t
. 5 .8
. 5.1 7 ap p l i es o nl y

wh en the t ax p ay er i s th e o wn er o f a b u si n es s ; i tcan n otap p l y wh en th e t ax p ay er i s th e b u s i n es s . Th i s i s b ecau s e t h e IRS “ can n ev er co l l ectth e- 1 1 -

[* 1 1 ] g o i n g -co n cern v al u e b y l ev y i n g an d s ei zi ng al l th e as s et s fro m th e t ax p ay er”, acco rd in g t o p et it i o n er. Pet it i o n er fu rt h er arg u es th ati f th e IRM p ro v is i o n al l o w s res p o n d en tt o u s e t h e g o in g -co ncern v al u at i o n m et h o d t o d et erm i n e p et i t i o n er’ s RCP t h en th e IRM p ro v i s i o n i t s el f “ i s an ab u s e o f d i s cret i o n b y th e IRS”. Res p on d en tco n t en d s th atth ere i s “ n ot hi n g p ro h i bi t i n g the IRS fro m
s el l i n g th e b u s i n es s o ff as a g o i n g co n cern aft er s ei zi n g i t ”. In effect p et i t i o n er as k s u s t o d eci d e t h at u s e o f t he g o i n g -co ncern v al u e o f a b u s i n es s i s n ev er ap p ro p ri at e wh en th e b u si n es s b ei n g v al u edi s th e t ax p ay er. W e
can n ots o co n cl ud e, n o r n eedwe, b ecau s e we fi n dth atSO Al b ri g ht ’ s cal cu l at i o n
o f RCP was fau l ty

fo r a d ifferen treas o n : Incal cu l at i n g p et i t io n er’ s RCP, SO Al b ri g h t i n creas edp et i t i o ner’ s g o i n g -co n cern v al u e b y th e am o u n t o f t h e u np ai d t ax l i ab i l i ty

thatthe ap prai s al t o o ki n t o acco un ti n i ts cal cu l at i o n o f v al u e an d b as edh i s d et erm i nat i o n o f RCP s ol el y o n th i s m o d i fi edv al u e. Th i s m o d i fi cat i o n t o th e v al u e at fi rs tb l u s h s eem s l o g ical . Redu ci ng p et i t i o n er’ s g o in g -co n cern v al u e b y i t s t ax l i ab i l i ty

wh end et erm i n i n g h o w m u ch
o f t h i s t ax l i ab i l i ty

p et it i o n er can p ay

wo u l ds eem t o d o ubl e co u n tth e t ax l i ab i l i t y
an d p ro v i d e a b o o n t o a b u s i n es s t ax p ay er wh o s e t ax d eb t i s p arto f t h e b u s i n es s b ei n g v al u ed . Iti s t h i s t ax l i ab i l i ty th atwi l l b e s at i s fi edwi th th e OIC, aft er al l
. Th e p ro b l em i s th at th e g o i n g-co n cern v al u e i s i n t en d edt o g i ve s o m e i n d i cat i o n o f- 1 2 -

[* 1 2 ] th e v al ue o f p et i t i o n er as a co n t i nu i n g b u s in es s , th ati s , wh ata t h i rdp art y
m i g h tp ay

t o b u y p et i t io ner as a wh o l e, i ncl u d in g al l o f i t s as s et s an dl i ab il i t i es . No th ird p art y wo u l db u y p et i t i o n er wi th o u tt ak i n g i n t o acco un tth e u np ai dt ax l i ab i l i ty . An dth e reco rds h o ws th atp et i t i o ner co u l dn o to b t ai n fi nan ci n g fo r t h e
m o di fi edam o un tei th er. Th i s h i g h l i g h t s th e l o g i cal d i ffi cu l ty o f u s i n g g o i ng co n cern val u e--wh ich p res u m es th ata t ax pay er can s el l i t s el f--t o d et erm i n e RCP. No n et h el es s , we can n o tco ncl u d e t h atco n s id erat i o n o f t h e g o i n g -co n cern v al u e
an d th e i n fo rm at i o n i n the ap p rai sal i s i rrel ev an to r t h atth e s et t l em en to ffi cer m ay
n o tco ns i d er t h i s i n fo rm at i o n , i n cl u d i n g the s p eci fi c as s et s an dl i ab i l i t i es , i n cl u d i n g th e t ax l i ab i l i ty , o n rem an d
. W e al s o d o n o th o l d t h atp et i t i o n er’ s o ffer
was reas o n ab l e. W e h o ld o n l y th atSO Al b ri g h t ’ s reject i o n o f p et i t i o n er’ s OIC
s o l el y o n th e b as i s o f h i s cal cu l at i o n o f RCP t h atu s edp et it i on er’ s g o i ng -co n cern
v al u at i o n b u td i s reg ard edco m pl et el y i t s t ax l i ab i l it y

was n otreas on ab le o n th i s
reco rd
. Co n cl u s io n W e h o ldth atSO Al b ri g h t ’ s cal cu l at i o n o f p et i t i o n er’ s RCP was n o t
reas on ab l e o n th e reco rdb efo re u s . Acco rd i n gl y , we wi l l rem an dth i s cas e t o th e Offi ce o f Ap p eal s fo r t h e p u rp o s e o f h av i n g i t d et erm i n e p et i ti o n er’ s RCP.- 1 3 -

[* 1 3 ] To refl ectthe fo reg o in g , Anap p ro p ri at e o rd er wi ll b e i s s u ed
.