Utah Resources International v. Mark Technologies , 2014 UT 59 ( 2014 )


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  •                    This opinion is subject to revision before final
                            publication in the Pacific Reporter
    
                                       
    2014 UT 59
    
    
                                          IN THE
    
             SUPREME COURT OF THE STATE OF UTAH
    
                     UTAH RESOURCES INTERNATIONAL, INC.,
                               a Utah Corporation,
                     Petitioner, Appellant, and Cross-Appellee,
                                             v.
                    MARK TECHNOLOGIES CORPORATION and
                            KENNETH G. HANSEN,
                   Respondent, Appellees, and Cross-Appellants.
    
                                    No. 20120427
                                  December 23, 2014
    
                            Third District, Salt Lake
                        The Honorable Vernice S. Trease
                                No. 040918982
    
                                       Attorneys:
           John H. Bogart, Salt Lake City, Craig M. White, Chicago, IL,
                                   for appellant
                  Bruce J. Boehm, Salt Lake City, for appellees
    
     CHIEF JUSTICE DURRANT authored the opinion of the Court, in which
              ASSOCIATE CHIEF JUSTICE NEHRING, JUSTICE DURHAM,
                     JUSTICE PARRISH, and JUSTICE LEE joined.
    
       CHIEF JUSTICE DURRANT, opinion of the Court:
                                     Introduction
        ¶1 This case arises out of a decision by two minority
    shareholders of Utah Resources International, Inc. (URI) to dissent
    from the company‘s consummation of a share-consolidation
    transaction. Utah law provides that shareholders may dissent from
    certain corporate transactions and requires the corporation to pay
    the dissenting shareholders ―fair value‖ for their shares.1 But here
    
       1   UTAH CODE § 16-10a-1302(1).
                                 URI v. MTC
                            Opinion of the Court
    URI and the dissenters disagreed on the ―fair value‖ of the
    dissenters‘ shares, which led to URI instituting a fair value
    proceeding in the district court. That court ultimately concluded that
    the fair value of the dissenters‘ shares was over two times the
    amount proposed by URI.
         ¶2 Before reaching the merits of this case, we first address
    whether URI waived its right to appeal given that it partially paid
    the judgment against it. We ultimately conclude that URI has not
    waived its right to appeal. URI has not satisfied the judgment against
    it in full and, regardless, it expressly reserved its right to appeal.
        ¶3 Turning to the merits, the primary question presented by
    URI is whether the district court erred in determining the fair value
    of the dissenters‘ shares. We conclude that the court did err in
    disallowing four deductions from URI‘s assets, namely, deductions
    for: (1) transaction costs associated with the anticipated sale of real
    estate, (2) trapped-in capital gains taxes related to the sale of real
    estate, (3) income taxes on oil and gas royalty interests, and (4) a
    discount on URI‘s minority interest in another company. In rejecting
    these deductions, the district court relied on inapplicable caselaw
    from other jurisdictions and misread our own caselaw. Accordingly,
    we vacate the district court‘s ruling and remand for proceedings
    consistent with this opinion. Because we vacate the district court‘s
    ruling on this basis, we do not address URI‘s additional claim that
    the court did not give adequate consideration to URI‘s market value
    or investment value. We also do not address the claims made by the
    dissenters in their cross appeal.2
                                 Background
                I. Before the 2004 Share-Consolidation Transaction
        ¶4 URI incorporated in Utah in 1966. The company engaged in
    a variety of business activities during the next four decades,
    including hotel operations, securities trading, and land
    development. But by early 2000, URI faced difficult economic
    
       2  Although we decline to reach the claims raised in the cross
    appeal, we briefly note them here. The dissenters argue that the
    district court erred by: (1) including URI‘s treasury shares in the
    number of outstanding shares, (2) failing to consider several alleged
    breaches of fiduciary duties in determining fair value, (3) improperly
    valuing the oil and gas royalty interests held by URI by not verifying
    the revenue projections with actual results, and (4) refusing to award
    them attorney fees.
    
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    circumstances and lacked sufficient liquidity to develop its land
    holdings. URI alleges that ―constant litigation‖ by two activist
    shareholders, Mark Technologies Corp. (MTC) and Kenneth
    Hansen,3 contributed to the company‘s struggles.4 Because of these
    circumstances, URI‘s management decided to wind down the
    company by selling its land holdings. From that point on, the
    company‘s primary business consisted of holding and selling
    undeveloped real estate. The company also collected royalty revenue
    from oil and gas mineral leases.
        ¶5 According to URI, most of its shareholders wanted to sell
    their stake in the company before it completed the winding-down
    process. From 2000 to 2004, several dozen shareholders sold their
    shares to URI‘s president, John Fife, at prices ranging from $1,000 to
    $4,000 per share. By 2004, URI had approximately thirty-five
    shareholders. Inter-Mountain Capital Corporation (IMCC) was the
    largest shareholder and held about eighty-seven percent of URI‘s
    outstanding shares.5
                            II. The 2004 Transaction
        ¶6 In late 2003, URI‘s board of directors wanted to provide the
    remaining shareholders added liquidity, so it investigated the
    possibility of conducting a share-consolidation transaction. The
    potential transaction consisted of two main steps. First, URI would
    effect a reverse-stock split through an amendment to its Articles of
    Incorporation. The company planned to reduce the number of
    outstanding shares on a 500 to 1 ratio. Each 500 shares of $100 par
    value stock would be converted into one share of $50,000 par value
    stock. Second, URI would buy out any fractional shareholders. The
    
    
       3  Throughout this opinion we refer to MTC and Mr. Hansen
    collectively as ―the Dissenters.‖ But we also refer to them
    individually as needed.
       4  URI notes that MTC and its owner, Mark Jones, filed six
    lawsuits against URI beginning in 1996. Among these suits was an
    attempt to block a sale of URI stock. In 1996, Mr. Jones attempted to
    obtain control of URI by buying shares held by the company‘s
    founder, John Morgan. Mr. Jones offered $3.00 per share. But he was
    outbid by John Fife, URI‘s president, who offered $3.35 per share.
    Mr. Jones tried to block the sale to Mr. Fife, but the case ultimately
    settled and the sale proceeded.
       5   Mr. Fife was the president and sole shareholder of IMCC.
    
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                                 URI v. MTC
                            Opinion of the Court
    transaction would have the effect of buying out all of URI‘s
    shareholders except for Mr. Fife and his company, IMCC.
        ¶7 URI‘s board hired Jeff Wright of Centerpoint Advisors, Inc.
    to appraise the company and determine the fair value of its shares.
    Mr. Wright had performed a similar valuation for URI on previous
    occasions.6 He issued a fairness opinion, which offered URI‘s board
    several possible values for the company‘s shares, including a market
    value of $2,750 per share, an investment value of $4,908 per share,
    and a net asset value of $5,644 per share.7
       ¶8 URI‘s board unanimously voted in favor of the share-
    consolidation transaction on March 26, 2004, and its shareholders
    approved the transaction just over two months later. The company
    made the transaction effective on June 15, 2004.8 Based on
    Mr. Wright‘s fairness opinion, URI decided to repurchase fractional
    shares for $5,250 per share held before the reverse-stock split.
    Accordingly, URI tendered payment of $656,250 to MTC for its 125
    shares, plus $5,214.04 in interest, and tendered payment of $162,750
    to Mr. Hansen for his 31 shares, plus $2,184.86 in interest.
        ¶9 MTC and Mr. Hansen were the only shareholders to object
    to the share-consolidation transaction. They valued their shares in
    URI at $31,847 per share. They complained that the share
    consolidation was the culmination of several attempts by Mr. Fife to
    gain an ―unpaid for majority position in URI‖ and ―squeeze out‖
    
       6   In 1999, URI engaged in a similar share-consolidation
    transaction. In that transaction, URI effected a 1,000 to 1 reverse-
    stock split and bought out fractional shareholders. URI paid the
    fractional shareholders $3.35 per share held prior to the reverse-stock
    split. This reduced the number of URI shareholders from
    approximately 500 to about 70.
       7 Mr. Wright‘s opinion relied, in part, on an appraisal of URI‘s
    real estate performed by Porter & Associates (Porter). As we explain
    below, the district court did not adopt Porter‘s appraisal but instead
    adopted one performed by Fortis Group (Fortis) because it
    concluded the Fortis appraisal was more accurate. URI does not
    challenge the court‘s finding of fact on this point and therefore we
    omit further discussion of the Porter appraisal.
       8 We refer to this date as the ―valuation date‖ because section 16-
    10a-1301(4) of the Utah Code defines the ―fair value‖ of a dissenter‘s
    shares as ―the value of the shares immediately before the
    effectuation of the corporate action to which the dissenter objects.‖
    
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    minority shareholders by purchasing their stock at undervalued
    prices. Ultimately, URI and the Dissenters were unable to reach an
    agreement regarding the value of the Dissenters‘ shares.
    Accordingly, URI timely petitioned the district court to determine
    the ―fair value‖ of the shares.9
               III. Fair Value Proceedings in the District Court
        ¶10 As noted above, on the valuation date, URI‘s primary
    business strategy was to hold real estate assets for sale. URI‘s vice
    president, Gerry Brown, testified that ―everything [was] for sale.‖ He
    estimated that it would take approximately ten years to sell all of the
    company‘s property. This business strategy was not contingent on
    the consummation of the share-consolidation transaction.
        ¶11 URI points out that because of its business strategy ―[t]here
    is accordingly no dispute that the vast majority of URI‘s value as of
    the valuation date, and its only realistic means of generating
    earnings, came from its assets.‖ URI‘s assets, as of the valuation date,
    can be divided into four general categories. First, URI held seventeen
    parcels (about 345 total acres) of undeveloped real estate in St.
    George, Utah. Second, it held a minority-membership interest in
    Hidden Hollows Associates, LLC (HHA), which is a closely held real
    estate company headquartered in Park City, Utah. Third, it owned
    oil and gas royalty rights. And fourth, it owned a variety of other
    miscellaneous assets, including cash and receivables.
        ¶12 One of URI‘s largest liabilities was trapped-in capital gains
    taxes on the St. George real estate. A trapped-in capital gains tax
    liability accounts for the fact that a company will incur a capital
    gains tax if it sells an appreciated asset.10
    
    
    
       9 See UTAH CODE § 16-10a-1330(1) (―If a demand for payment . . .
    remains unresolved, the corporation shall commence a proceeding
    within 60 days after receiving the payment demand . . . and petition
    the court to determine the fair value of the shares and the amount of
    interest.‖).
       10  SHANNON P. PRATT, BUSINESS VALUATION DISCOUNTS AND
    PREMIUMS 276 (2d ed. 2009) (―The concept of trapped-in capital gains
    is that a company holding an appreciated asset would have to pay a
    capital gains tax on the sale of the asset. If ownership of the company
    were to change, the liability for the tax on the sale of the appreciated
    asset would not disappear.‖).
    
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                                  URI v. MTC
                             Opinion of the Court
        ¶13 The district court received three appraisals of URI—two from
    the court-appointed appraiser, Roger Smith, and one from URI‘s
    testifying expert, Francis Burns. The core issues before us on appeal
    relate to these appraisals, and consequently we separately describe
    each appraisal in some detail below.
                           A. Mr. Smith’s Appraisals
        ¶14 Mr. Smith‘s initial appraisal estimated the value of the
    Dissenters‘ shares using an asset-value approach.11 That approach
    required him to separately appraise the value of each of URI‘s assets.
    In determining the value of URI‘s assets, Mr. Smith discounted the
    value of URI‘s interest in HHA, based on URI‘s status as a minority
    shareholder and the projected transaction costs in selling that
    interest.12 He then deducted from the discounted asset value both
    booked and projected liabilities. These included deductions for
    (1) anticipated trapped-in capital gains taxes and transaction costs
    related to the sale of the St. George real estate,13 and (2) income taxes
    
    
       11 We note that each of Mr. Smith‘s appraisals state that he
    considered both the income value approach and market value
    approach, in addition to an asset value approach. But Mr. Smith
    apparently calculated neither an income value nor market value for
    URI as a whole. Rather, he used an income approach only to value
    URI‘s oil and gas royalty interests. Moreover, he noted that ―the
    Market Approach was not used [by him] in estimating the value of
    URI as a whole,‖ but that a market approach was used by Fortis in
    valuing URI‘s real estate.
       12  Mr. Smith used the Fortis real estate appraisal to value HHA‘s
    land holdings, which he used to compute the value of HHA as a
    company. He then calculated the asset value of URI‘s interest in
    HHA. URI owned, on the valuation date, 49.58 percent of HHA.
    Because URI held only a minority stake in HHA and because there
    would be transaction costs in selling that interest, Mr. Smith applied
    a fifteen percent discount to URI‘s interest. This reduced the value of
    URI‘s interest in HHA by $150,000.
       13 Mr. Smith first reduced the gross value of the St. George real
    estate by 5.5 percent for transaction costs associated with selling the
    land, including anticipated broker commissions and closing costs.
    He then reduced the adjusted value by 37.3 percent of the difference
    between it and the land‘s book value (the difference being the net
    appreciation of the property). In sum, these calculations reduced
    URI‘s net asset value by $5,818,500.
    
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    on URI‘s oil and gas royalty interests.14 In the end, Mr. Smith derived
    an asset value for URI of $17,769,073, or $7,571 per share.15
        ¶15 Both parties contested Mr. Smith‘s initial valuation. URI
    objected to it as being ―incomplete, insofar as it did not offer an
    Investment Value or Market Value for URI.‖ The district court
    overruled URI‘s objections. The Dissenters challenged, as a matter of
    law, Mr. Smith‘s use of certain asset discounts and projected
    liabilities deductions. Specifically, they challenged Mr. Smith‘s
    application of a discount to URI‘s interest in HHA on the basis that
    any marketability discount was contrary to Utah law. And they
    challenged Mr. Smith‘s use of tax and transaction costs deductions
    on the basis that any future land sales, and the accompanying taxes
    and costs, were ―speculative‖ and that Utah law prohibited the
    district court from considering them. The district court sustained the
    Dissenters‘ objections and ordered Mr. Smith to produce a new
    appraisal without any marketability discounts or adjustments for
    built-in capital gains taxes. The district court‘s disallowance of these
    discounts and deductions is the first issue URI has raised on appeal.
       ¶16 Mr. Smith stated that he believed his initial appraisal
    represented the fair value of URI, but he agreed to amend his report,
    indicating that he and his fellow appraisers were ―not attorneys and
    [were] not qualified to interpret Utah law.‖ His amended valuation
    resulted in the following differences:
    
    
    
    
       14 Mr. Smith employed an income capitalization method to
    appraise the oil and gas royalty interests. His valuation describes this
    approach as ―‗a method within the income approach whereby
    economic benefits for a representative single period are converted to
    value through division by a capitalization rate.‘‖ This approach
    accounts for the costs necessary to generate income, including
    income taxes. Ultimately, accounting for income taxes reduced the
    capitalized value of the oil and gas royalties by $1,428,000.
       15  Mr. Smith‘s asset approach valuation was nearly $2,000 per
    share more than Mr. Wright‘s 2004 valuation. This difference is
    largely attributable to the fact that Mr. Smith used the Fortis real
    estate appraisal rather than the Porter real estate appraisal used by
    Mr. Wright. As noted above, supra ¶ 7 n.7, the district court chose to
    rely on the Fortis appraisal and URI does not challenge that finding
    of fact.
    
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                                      URI v. MTC
                                 Opinion of the Court
             Asset           Initial Valuation    Amended Valuation    Difference
    St. George Real Estate      $9,835,000           $15,653,500        $5,818,500
    Mineral Royalties           $2,400,000            $3,828,000        $1,428,000
    HHA                         $1,351,000            $1,501,000        $150,000
    Other Net Assets            $4,183,073            $4,183,073            -
    Total                       $17,769,073          $25,165,573        $7,396,500
    Total per Share               $7,571               $10,722           $3,151
    
    
    
            ¶17 Mr. Smith later repudiated his own amended valuation. He
        stated that the amended valuation conflicted with generally accepted
        appraisal techniques and was ―not consistent with how [he]
        normally value[s] businesses.‖ He testified that he had never valued
        an asset without considering both the costs of selling the asset and
        associated taxes. He also noted that as to the oil and gas royalty
        interests specifically, the amended values were mathematically and
        factually erroneous, but were calculated to satisfy the district court‘s
        requirements. Moreover, Mr. Smith stated that he thought his first
        appraisal accurately valued URI‘s assets and that it was his view that
        no rational buyer would have paid more than $25,000,000 for URI on
        the valuation date. Despite Mr. Smith‘s protestations, the district
        court adopted his amended valuation in full.
                               B. Mr. Burns’s Appraisal
            ¶18 The district court overruled URI‘s objections to Mr. Smith‘s
        initial valuation, but did so without prejudice and permitted URI to
        offer its own expert testimony. Consequently, URI retained Francis
        Burns to perform a fair value appraisal. Mr. Burns agreed with
        Mr. Smith that Mr. Smith‘s amended valuation did not accurately
        reflect URI‘s fair value. He also largely agreed with the asset value
        Mr. Smith derived in his first valuation. He concluded it was
        appropriate to consider tax adjustments and transaction costs in
        deriving net asset value because URI planned to sell its real estate
        assets and any hypothetical investor would similarly discount URI‘s
        value.
           ¶19 Mr. Burns calculated two different values for URI‘s shares —
        market value and adjusted net asset value. He concluded that the
        market value of URI was $11,127,127. He derived this number by
        looking first to prior transactions involving URI‘s stock. He found
        that the most recent transaction involved stock sold by Mr. Fife to a
        company controlled by Mr. Morgan for $2,750. Mr. Burns concluded
        that ―it is clear the $2,750 per share price was an established market
        price between parties negotiating at arm‘s length.‖ But Mr. Burns
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    also concluded that ―this price would need to be adjusted to remove
    the impact of discounts for lack of control and lack of marketability.‖
    Based on data of transactions of real estate limited partnership
    interests, Mr. Burns concluded that the prior transaction price of
    $2,750 represented a forty-two percent discount for lack of control
    and lack of marketability. Accordingly, he concluded that the
    adjusted fair market value was $4,741 per share. Mr. Burns also
    noted that he attempted to identify guideline companies comparable
    to URI by searching Bloomberg, but he concluded that ―there were
    no public companies that fit URI‘s profile sufficiently enough to be
    used as guideline comparisons.‖
        ¶20 In addition to market value, Mr. Burns provided an
    ―adjusted net asset value‖ for URI‘s shares. He explained that he
    could not provide a traditional income value for URI‘s shares
    ―because URI‘s historical earnings did not reflect the earnings it
    could expect in the future from selling its large portfolio of real
    estate.‖ So he calculated adjusted net asset value instead. He
    explained that this value blends ―the income and asset methods —
    with appraised property on the balance sheet capturing future
    revenues and liabilities capturing future operating expenses and
    taxes.‖16 He then concluded that URI‘s adjusted net asset value was
    $15,700,365. The following table summarizes Mr. Burns‘s
    calculations:
    
    
    
    
       16 Mr. Smith testified that Mr. Burns‘s approach of projecting
    asset sales and discounting the result to present value was ―certainly
    one way to do it.‖
    
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                                         URI v. MTC
                                    Opinion of the Court
                                                      After Built-In     After Operating
                                    After Control &
                                                      Capital Gains    Expenses & Booked
        Asset        Asset Value     Marketability
                                                       (Losses) Tax        Liabilities
                                     Adjustments
                                                      Adjustments         Adjustments
    Real Estate      $15,653,500     $14,792,55817
                                                      $12,165,97418
    HHA Interest     $1,501,000       $1,170,78020
    Royalty                                                               $15,700,36519
                     $2,456,00021     $2,456,000        $2,456,000
    Interests
    Other Assets     $4,552,346       $4,552,346        $4,552,346
    Total            $24,162,846      $22,971,684      $19,174,320        $15,700,365
    Total
                       $10,295          $9,788           $8,170              $6,690
    per Share
    
    
    
             Mr. Burns reduced the value of the real estate by 5.5 percent to
                17
    
        account for broker commissions and closing fees that would be
        incurred in selling the property. Mr. Wright applied the same
        deduction in his initial valuation.
              Mr. Burns adjusted the value of URI‘s real estate and interest in
                18
    
        HHA for the projected capital gains and losses that would result by
        liquidating each of those assets. He estimated a capital gain of
        $13,291,947 for the real estate and a capital loss of $305,352 for the
        HHA interest. He then discounted the projected capital gain based
        on management‘s projection that it would take ten years to liquidate
        the real estate. Ultimately, accounting for built-in capital gains and
        losses reduced the combined value of the two assets by $3,797,364.
              Mr. Burns reduced the value of URI‘s assets by $3,104,682 to
                19
    
        account for ongoing operating expenses. He noted that this was
        appropriate because URI would ―continue to incur operating
        expenses as it managed and liquidated its [assets].‖ He also reduced
        asset value by $369,273 to account for estimated booked liabilities.
             Mr. Burns reduced the value of URI‘s minority interest in HHA
                20
    
        by twenty-two percent to account for a lack of control and lack of
        marketability. Mr. Smith likewise discounted URI‘s interest in HHA,
        but by only fifteen percent.
             Mr. Burns agreed with Mr. Smith that the income capitalization
                21
    
        approach was an appropriate way to value the royalty interests. But
        he adjusted the value derived by Mr. Smith upwards by $56,000
        because, according to him, the royalty income figures provided to
        Mr. Smith by URI were already net of production expenses. In effect,
        he believed Mr. Smith double counted the expenses.
    
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            ¶21 Mr. Burns assigned relative weights of sixty percent and
        forty percent to adjusted net asset value and market value,
        respectively. This resulted in his ultimate conclusion that the fair
        value of URI‘s shares was $5,910 per share.
            ¶22 In sum, the district court had a variety of appraisals of URI‘s
        fair value before it. The table below summarizes those valuations:
                        Asset Value         Investment      Market Value   Fair Value
        Valuation
                         per Share        Value per Share    per Share     per Share
    Mr. Wright             $5,644             $4,908           $2,750       $5,25022
    Mr. Smith              $7,571          None offered     None offered     $7,571
    Mr. Smith
                          $10,722          None offered     None offered    $10,722
    (Amended)23
    Mr. Burns              $6,690         None offered24       $4,741       $5,91025
    
    
    
           ¶23 The district court ultimately accepted only Mr. Smith‘s
        amended valuation, holding that any adjustment for marketability or
        taxes was improper as a matter of law. Accordingly, the court
        entered judgment against URI for the difference of Mr. Smith‘s
        amended valuation share price and what URI paid the Dissenters in
        2004 ($10,722 – $5,250 = $5,472 per share difference), plus interest.
        URI paid part of the judgments in the amounts of $750,000 to MTC
        and $185,000 to Mr. Hansen. In the letter delivering the payment,
        URI stated that it did not intend to waive its current appeal and that
    
           22 This value was proposed by URI and confirmed by Mr. Wright
        as a fair value.
           23 As explained above, Mr. Smith used the income and market
        approaches in valuing certain assets held by URI. Supra ¶ 14 n.11.
        But he did not provide separate income and market values for URI
        as a whole.
           24 As noted above, Mr. Burns concluded that he could not value
        URI using a traditional income approach because he could not
        accurately estimate future cash flows. But he noted that the
        ―Adjusted Net Asset Value‖ he derived for URI was a ―blending of
        the income and asset methods‖ because it captured future revenues
        and future expenses.
           25Mr. Burns‘s valuation relied on the appraisal done by the Fortis
        Group. He also provided a fair value of $5,333 based on Porter‘s
        appraisal.
    
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                                 URI v. MTC
                             Opinion of the Court
    it was paying only to abate interest and reduce the threat of
    postjudgment enforcement proceedings. The Dissenters accepted the
    payments and filed partial satisfactions of judgment. URI now
    appeals the district court‘s determination of the fair value of its
    shares. We have jurisdiction pursuant to Utah Code section 78A-3-
    102(3)(j).
                             Standard of Review
        ¶24 URI asks us to determine whether the district court properly
    determined the fair value of the Dissenters‘ shares in URI. ―[W]hile
    the ultimate determination of fair value is a question of fact, the
    determination of whether a given fact or circumstance is relevant to
    fair value under [Utah law] is a question of law which we review de
    novo.‖26
                                   Analysis
       ¶25 Before addressing the merits of this case, we consider
    whether URI waived its right to appeal by voluntarily making a
    partial payment of the judgment and conclude that URI did not
    waive its right to appeal. URI has not fully satisfied the judgment
    and, moreover, URI has expressly reserved its right to appeal
    throughout the proceedings.
        ¶26 After concluding that URI‘s appeal is not moot, we turn to
    the merits of the case. URI challenges the district court‘s fair value
    determination in two respects. First, it argues that the court erred in
    rejecting deductions for (1) transaction costs associated with the
    anticipated sale of URI‘s St. George real estate, (2) trapped-in capital
    gains taxes related to the sale of the St. George real estate, (3) taxes
    on URI‘s oil and gas royalty interests, and (4) URI‘s minority interest
    in HHA. Second, it argues that the district court erred by failing to
    give adequate consideration to URI‘s investment value and market
    value.
        ¶27 We agree with URI that the district court erroneously
    refused to consider the four challenged deductions. In rejecting use
    of the deductions, the court relied on inapplicable caselaw from
    other jurisdictions and misapplied our own caselaw. Further, it
    rejected several of the deductions on the basis that they were
    speculative, even though use of the deductions is an accepted
    technique by financial professionals. Because of these errors, we
    vacate the district court‘s fair value determination and remand the
    
       26 Hogle v. Zinetics Med., Inc., 
    2002 UT 121
    , ¶ 10, 
    63 P.3d 80
     (first
    alteration in original) (internal quotation marks omitted).
    
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    case to the district court for proceedings consistent with this opinion.
    And because we vacate the court‘s ruling on this basis, we decline to
    reach URI‘s second claim on appeal and the claims made by the
    Dissenters in their cross appeal.
      I. Judgment Debtors Waive Their Right to Appeal by Voluntarily
       Paying a Judgment Without Manifesting Their Intent to Appeal
        ¶28 In the companion case to this appeal, the parties argued at
    length over the question whether a judgment debtor waives its right
    to appeal by satisfying the judgment.27 URI has not satisfied the
    judgment, so there is no plausible argument in this case that URI has
    waived its right to appeal. That said, both URI and the Dissenters
    were validly concerned that they may waive their right to appeal by
    either satisfying the judgment or acquiescing in the judgment,
    respectively. And given the considerable confusion in our caselaw
    and in the district court below over this important question, we take
    the opportunity now to clarify the state of the law.
       ¶29 The general rule in our state is that ―if a judgment is
    voluntarily paid, which is accepted, and a judgment satisfied, the
    controversy has become moot and the right to appeal is waived.‖28
    This rule affects both parties—if a judgment debtor ―voluntarily
    pa[ys]‖ the judgment, he may waive his right to appeal.29 Similarly, a
    judgment creditor ―who accepts a benefit under a judgment is
    estopped from later attacking the judgment on appeal.‖30 But both
    parties waive their rights only with respect to the claims for which
    the judgment was paid or accepted.31
    
       27   Utah Res. Int’l, Inc. v. Mark Techs. Corp., 
    2014 UT 60
    .
       28   Jensen v. Eddy, 
    514 P.2d 1142
    , 1143 (Utah 1973).
       29   Id.
       30 Trees v. Lewis, 
    738 P.2d 612
    , 613 (Utah 1987). Multiple rationales
    support this rule, as we enunciated in Richards v. Brown, 
    2012 UT 14
    ,
    ¶¶ 13–20, 
    274 P.3d 911
    . One reason for this rule is that in accepting
    the benefit, the judgment creditor manifests his or her interest in
    finality and desire to accept the terms of the judgment. Id. ¶ 13. Also,
    a judgment creditor who accepts the benefits of a judgment shifts the
    burden of risk to the judgment debtor, because the risk of recovery
    now falls on the judgment debtor if the judgment is overturned on
    appeal. Trees, 738 P.2d at 613.
       31See Richards, 
    2012 UT 14
    , ¶ 16 (―The right to appeal is waived
    only for the specific claims upon which payment is accepted.‖);
                                                            (continued)
                                    13
                                     URI v. MTC
                                 Opinion of the Court
        ¶30 In this case, we are asked to clarify the scope of the rule as it
    pertains to judgment debtors. The question is of central importance
    to the case, since URI has been presented with a dilemma—either
    satisfy the judgment and risk waiving its right to appeal, or withhold
    payment of the judgment but face the mounting interest from the
    onerous statutory rate. As we clarify below, judgment debtors may
    avoid this dilemma by satisfying the judgment but expressly
    reserving their right to appeal.
        ¶31 Again, the general rule is that ―if a judgment is voluntarily
    paid, which is accepted, and a judgment satisfied, the controversy
    has become moot and the right to appeal is waived.‖32 We have
    reaffirmed the validity of this general rule on several occasions on
    the basis that ―[p]ayment and its acceptance manifest the parties‘
    expression of finality and resolution of all issues embraced by the
    particular claim.‖33 In Ottenheimer v. Mountain States Supply Co.,34 we
    confirmed this to be the rule even where a judgment debtor wishes
    to pay the judgment while still reserving his right to appeal. In that
    case, the lower court ruled against a landowner, ordering him to
    vacate the property and pay money due under the lease at issue.35
    The landowner appealed and vacated the premises but noted that by
    vacating the premises he was not ―waiving any of [his] claims
    against [any of the] plaintiffs.‖36 Despite the landowner‘s expression
    of his clear intent to appeal, we ruled that he had waived his right to
    appeal.37
       ¶32 We muddied the waters in Golden Spike Equipment Co. v.
    Croshaw,38 however, when we concluded that
    
    
    Ottenheimer v. Mountain States Supply Co., 
    188 P. 1117
    , 1118–19 (Utah
    1920) (finding that the judgment debtor‘s act of surrendering
    property waived the judgment debtor‘s right to appeal the issue).
       32   Jensen, 514 P.2d at 1143.
       33Richards, 
    2012 UT 14
    , ¶ 13; see also Gardner v. Bd. of Cnty.
    Comm’rs, 
    2008 UT 6
    , ¶ 46, 
    178 P.3d 893
    ; Sullivan v. Utah Bd. of Oil, Gas
    & Mining, 
    2008 UT 44
    , ¶ 12, 
    189 P.3d 63
    .
       34   188 P. at 1118–19.
       35   Id.
       36   Id. at 1118 (internal quotation marks omitted).
       37   Id. at 1118–19.
       38   
    401 P.2d 949
     (Utah 1965).
    
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             whether the payment of a judgment precludes the
             taking of an appeal would depend on the
             circumstances. We do not disagree with the
             proposition that if the payment is made under
             circumstances which show that the party intends to be
             bound by the judgment, an appeal should not be
             allowed. On the other hand, conditions may be such as to
             justify the payment of a judgment with the intention of
             preserving the right to appeal. When this is made to
             appear, the right to appeal should not be denied.39
    We thus recognized that mere payment of a judgment does not
    necessarily demonstrate acquiescence in the judgment. And where the
    judgment debtor‘s intention of preserving his right to appeal ―is
    made to appear, the right to appeal should not be denied,‖ since
    there is no acquiescence in that circumstance.40
        ¶33 Given the confusion that our caselaw in this field has
    created, we clarify today that although the general rule that
    voluntary payment of a judgment waives one‘s right to appeal is still
    valid, where a judgment debtor‘s intention of preserving his right to
    appeal ―is made to appear‖ clearly on the record, he does not waive
    his right to appeal.41 To the extent that our prior caselaw holds or
    implies otherwise, we disavow such statements. Furthermore, it is
    clear in this case that URI‘s appeal is not moot: the judgment has
    never been fully satisfied and URI has, from the time the final
    judgment was entered, clearly indicated its intent to appeal from the
    fair value assessment.
    II. We Vacate the District Court‘s Fair Value Ruling Because It Erred
             in Concluding That the Challenged Discounts and
                      Deductions Were Impermissible
                          A. Utah’s Dissenters’ Rights Statute
       ¶34 Before addressing each of the specific discounts and
    deductions at issue in this case, we briefly describe the dissenters‘
    rights statute to give context. Utah‘s dissenters‘ rights statute
    provides a mechanism through which minority shareholders can
    dissent from certain corporate actions and force the corporation ―to
    provide [the] dissenting minority with the fair value of the shares
    
       39   Id. at 951 (emphases added) (footnotes omitted).
       40   Id.
       41   Croshaw, 401 P.2d at 951.
    
                                         15
                                       URI v. MTC
                                   Opinion of the Court
    that they possess.‖42 A shareholder‘s right to dissent is triggered by a
    narrow class of corporate actions,43 none of which are applicable
    here. But the statute also allows a shareholder to dissent ―in the
    event of any other corporate action to the extent . . . a resolution of
    the board of directors so provides.‖44 Such a resolution gave rise to
    the Dissenters‘ right to dissent here. URI‘s Board of Directors passed
    a resolution making dissenters‘ rights available upon consummation
    of the share-consolidation transaction.
        ¶35 After a shareholder provides the corporation with notice
    that the shareholder intends to dissent and demands payment, the
    corporation is obligated to ―pay the amount the corporation
    estimates to be the fair value of the dissenter‘s shares, plus interest to
    each dissenter.‖45 A shareholder may contest the corporation‘s fair
    value determination by ―notify[ing] the corporation in writing of his
    own estimate of the fair value of his shares and demand payment of
    the estimated amount.‖46 The corporation then has the choice to
    either pay the shareholder the amount demanded or, instead, to
    ―commence a proceeding within 60 days after receiving the payment
    demand . . . and petition the court to determine the fair value of the
    shares and the amount of interest.‖47 If the corporation chooses to
    commence proceedings in court, the court may appoint appraisers to
    ―recommend decision on the question of fair value.‖48 The court‘s
    fair value determination is binding on the parties and ―[e]ach
    dissenter . . . is entitled to judgment . . . for the amount, if any, by
    which the court finds that the fair value of his shares, plus interest,
    exceeds the amount paid by the corporation.‖49
    
       42   Hogle v. Zinetics Med., Inc., 
    2002 UT 121
    , ¶ 13, 
    63 P.3d 80
    .
       43 UTAH CODE § 16-10a-1302(1) (including consummation of: (1) ―a
    plan of merger,‖ (2) ―a plan of share exchange,‖ (3) ―a sale, lease,
    exchange, or other disposition of all, or substantially all, of the
    property of the corporation,‖ and (4) ―a sale, lease, exchange, or
    other disposition of all, or substantially all, of the property of an
    entity controlled by the corporation‖).
       44   Id. § 16-10a-1302(2).
       45   Id. § 16-10a-1325(1).
       46   Id. § 16-10a-1328(1)
       47   Id. § 16-10a-1330(1).
       48   Id. § 16-10a-1330(4).
       49   Id. § 16-10a-1330(5)(a).
    
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        ¶36 There are few specific rules that guide a district court‘s ―fair
    value‖ determination. The dissenters‘ rights statute defines ―fair
    value‖ as ―the value of the shares immediately before the
    effectuation of the corporate action to which the dissenter objects,
    excluding any appreciation or depreciation in anticipation of the
    corporate action.‖50 In short, the statute requires that ―any effect of
    the [triggering event] must be excluded‖ in determining fair value.51
          ¶37 Two of our cases address what constitutes ―fair value.‖ First,
    in Oakridge Energy, Inc. v. Clifton, we adopted what is commonly
    referred to as the Delaware Block Method.52 Under that approach,
    ―the three most recognized and relevant elements of fair value for
    stock valuation purposes are asset value, market value, and
    investment value.‖53 We noted that while ―[a]ll three components of
    fair value may not influence the result in every valuation proceeding
    . . . all three should be considered.‖54
        ¶38 We next addressed the issue of fair value in Hogle v. Zinetics
    Medical, Inc.55 In that case, we prohibited the use of shareholder-level
    minority or marketability discounts.56 We also clarified that ―fair
    value‖ of a dissenters‘ shares is the dissenters‘ ―proportionate share
    of the value of 100% of the [corporation‘s] equity.‖57
    
    
    
    
       50   Id. § 16-10a-1301(4).
       51   Oakridge Energy, Inc. v. Clifton, 
    937 P.2d 130
    , 134 (Utah 1997).
       52  Id. at 132; R. FRANKLIN BALOTTI & JESSE A. FINKELSTEIN,
    DELAWARE LAW OF CORPORATIONS AND BUSINESS ORGANIZATIONS
    § 9.45[B] (3d ed. 2013).
       53   Hogle, 
    2002 UT 121
    , ¶ 18.
       54 Oakridge Energy, Inc., 937 P.2d at 135 (first alteration in original)
    (internal quotation marks omitted); see also Hogle, 
    2002 UT 121
    , ¶¶
    22, 31 (concluding that the district court was not required to consider
    asset value ―where the parties had adduced none‖ and approving of
    the court‘s decision to ―substantially disregard[] [market value]‖
    where the court concluded the appraisers‘ approach was unreliable
    (internal quotation marks omitted)).
       55   
    2002 UT 121
    .
       56   Id. ¶¶ 45–46.
       57   Id. ¶ 45 (internal quotation marks omitted).
    
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                                  URI v. MTC
                             Opinion of the Court
        ¶39 In sum, under the dissenters‘ rights statute and our caselaw,
    ―fair value‖ is determined by (1) assessing the dissenters‘
    proportionate share of the value of one-hundred percent of the
    corporation‘s equity; (2) considering the asset, market, and
    investment value approaches, to the extent that those approaches
    have been presented by the parties and are reasonably reliable under
    the circumstances; (3) without using shareholder-level minority or
    marketability discounts; and (4) without including any effect of the
    triggering event. Apart from these elements, courts have widely held
    that ―‗all generally accepted techniques of valuation used in the
    financial community‘‖ are appropriate in determining fair value.58
    With this background in place, we turn now to the claims raised in
    this appeal.
            B. The District Court Erred in Rejecting as a Matter of Law a
                  Discount for Transaction Costs and a Deduction for
                             Trapped-In Capital Gains
    1. Discount for Transaction Costs
       ¶40 In his initial valuation, Mr. Smith reduced the gross value of
    URI‘s St. George real estate by 5.5 percent for anticipated broker
    commissions and closing costs. The district court rejected this
    discount for two reasons. First, it concluded that it was an
    impermissible marketability discount under our decision in Hogle.
    And second, it concluded the discount was improper because it was
    ―speculative.‖ The district court erred in both respects.
    
    
    
    
       58 Bingham Consolidation Co. v. Groesbeck, 
    2004 UT App 434
    , ¶ 39,
    
    105 P.3d 365
     (quoting Paskill Corp. v. Alcoma Corp., 
    747 A.2d 549
    , 556
    (Del. 2000)); see Weinberger v. UOP, Inc., 
    457 A.2d 701
    , 712–13 (Del.
    1983) (explaining that the Delaware Block Method does not
    ―exclusively control‖ the determination of fair value but that courts
    should consider ―any techniques or methods which are generally
    considered acceptable in the financial community and otherwise
    admissible in court‖); F. HODGE O‘NEAL & ROBERT B. THOMPSON, 1
    OPPRESSION OF MINORITY SHAREHOLDERS AND LLC MEMBERS § 5:32
    (2014) (describing the Weinberger approach of utilizing ―techniques
    or methods which are generally considered acceptable in the
    financial community‖ as the ―modern method [that] has generally
    supplanted a more formalistic approach of an earlier time that
    focused on market value, asset value, and earnings value or some
    combination of those factors‖).
    
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       ¶41 As to the court‘s first reason for rejecting the transaction
    costs discount, URI argues that the court misapplied Hogle because
    the marketability discount we disapproved of there was one that
    applied at the shareholder level, whereas here the discount was
    applied at the asset level. We agree.
        ¶42 Described generally, a shareholder-level discount
    ―involve[s] varying ‗fair value‘ based on the characteristics of the
    shares in the hands of particular shareholders.‖59 By contrast, an
    asset-level discount reduces the value of a specific asset because of
    that asset‘s particular characteristics.60 In Hogle, we followed the
    majority rule in holding that ―discounts at the shareholder level are
    inherently unfair to the minority shareholder who did not pick the
    timing of the transaction and is not in the position of a willing
    seller.‖61 We explained that
             [t]he American Law Institute explicitly confirms the
             interpretation of fair value as the proportionate share
    
       59ROBERT A. RABBAT, Application of Share-Price Discounts and Their
    Role in Dictating Corporate Behavior: Encouraging Elected Buy-Outs
    Through Discount Application, 43 WILLAMETTE L. REV. 107, 141 (2007).
       60  The Dissenters argue that shareholder-level and asset-level
    discounts have identical effects and that distinguishing between the
    two ―allow[s] an end-run around the prohibition against minority
    and marketability discounts.‖ To support this argument, they cite a
    law review article that suggests that distinguishing shareholder-level
    discounts from corporate-level discounts is ―tenuous at best.‖ Id. But
    the Dissenters overlook the fact that the article discusses corporate-
    level discounts not asset-level discounts. Nowhere does the article
    suggest that it is improper to distinguish asset-level discounts from
    shareholder-level discounts. As the author notes, distinguishing
    corporate-level discounts from shareholder-level discounts is
    tenuous because ―[a]t both levels, the discounts account for the same
    economic realities; the difference is only in the timing of
    application.‖ Id. at 143. This concern is inapplicable when
    distinguishing asset-level discounts from shareholder-level
    discounts because the two do not account for the same economic
    realities. For instance, here the discount for transaction costs
    associated with selling URI‘s real estate has nothing to do with the
    fact that the Dissenters, because of their minority position, lacked the
    ability to control URI.
       61   
    2002 UT 121
    , ¶ 45 (internal quotation marks omitted).
    
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                                   URI v. MTC
                               Opinion of the Court
             of the value of 100% of the equity, by entitling a
             dissenting shareholder to a proportionate interest in
             the corporation, without any discount for minority
             status or, absent extraordinary circumstances, lack of
             marketability.62
    We did not address asset-level marketability discounts in our
    decision. But the district court extended Hogle to asset-level
    discounts, reasoning that the ―decision did not carve out any
    exceptions for asset-level discounts‖ and ―Hogle‘s prohibition . . .
    would be largely meaningless if courts were to allow a company
    engaging in a stock consolidation that results in forcing out its
    minority shareholders to discount the value of those shares through
    ‗asset‘ level discounts.‖
       ¶43 This was an unwarranted extension of our decision in Hogle.
    The marketability discount we disapproved of in that case was one
    that specifically affected the shares held by dissenting shareholders.
    Because dissenting shareholders ―are unwilling sellers with no
    bargaining power,‖ it would be unfair to penalize them for the lack
    of marketability of their shares or their lack of control.63
        ¶44 But these concerns are not at issue where a company
    discounts the value of an asset that it intends to sell for reasonable
    transaction costs. URI‘s undisputed business strategy at the time of
    the valuation date was holding and selling its real estate. All of the
    appraisers recognized that it was reasonably foreseeable that URI
    would incur expenses in selling the real estate. These expenses
    include costs associated with marketing the property, broker
    commissions, and closing costs. And as Mr. Smith noted in his initial
    valuation, ―we have calculated appropriate discounts to apply to
    the[] [real estate assets] due to the fact that they would have an equal
    impact on both [parties].‖ Because the transaction costs here would
    have equally affected both the majority and minority shareholders,
    the district court erred by equating these transaction costs with the
    shareholder-level marketability discounts we prohibited in Hogle.
       ¶45 The district court‘s second rationale for rejecting the
    discount for transaction costs is also flawed. The court rejected use of
    the discount on the alternative basis that the costs were
    ―speculative.‖ To reach this conclusion, the court relied on three
    
       62 Id. ¶ 45 (alteration in original) (internal quotation marks
    omitted).
       63   Id. (internal quotation marks omitted).
    
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                              Opinion of the Court
    
    cases from other jurisdictions.64 These cases hold that in determining
    fair value it is improper for a court to consider costs incurred after
    the event triggering dissenters‘ rights. For instance, in Hansen v. 75
    Ranch Co., the Montana Supreme Court stated that ―if costs are
    incurred after effectuation of the [triggering event], those costs
    should not be assessed against the dissenting shareholders.‖65 But
    these cases are inapposite here because in each of the cases the
    company had no intent to sell its assets before the triggering event.66
    In contrast, URI‘s undisputed business strategy of selling its real
    estate assets had been in place for approximately four years before
    the consummation of the share-consolidation transaction. And Mr.
    Brown testified that the company planned to sell its real estate over
    the course of ten years. Given this business strategy, it was
    appropriate for the appraisers to consider reasonable transaction
    costs in valuing URI‘s real estate.
        ¶46 In sum, the transaction costs discount applied by Mr. Smith
    in his initial appraisal was not an impermissible marketability
    discount because it did not penalize the Dissenters for their lack of
    control of the company. Moreover, in concluding that the discount
    was ―speculative,‖ the district court applied inapplicable caselaw
    from other jurisdictions and overlooked the fact that URI‘s
    undisputed business strategy was to sell its real estate. Accordingly,
    we conclude that the court erred in rejecting the discount as a matter
    of law.
    2. Trapped-In Capital Gains Deduction
    
       64See Hansen v. 75 Ranch Co., 
    957 P.2d 32
     (Mont. 1998); In re 75,629
    Shares of Common Stock of Trapp Family Lodge, Inc. (Trapp Family), 
    725 A.2d 927
     (Vt. 1999); Brown v. Arp & Hammond Hardware Co., 
    141 P.3d 673
     (Wyo. 2006).
       65   957 P.2d at 43.
       66 See id. (―[O]rdinarily when dissenting stock is accorded net
    asset value, that value is to be determined by considering the
    corporation as a going concern and not as if it is undergoing
    liquidation.‖ (internal quotation marks omitted)); Trapp Family, 725
    A.2d at 934 (―Here, there was no evidence that [the company] was
    undergoing liquidation on the valuation date. Indeed, the evidence
    indicated that [the company] was a going concern.‖); Brown, 141 P.3d
    at 689 (―The undisputed testimony indicated that there were no
    current plans to sell any of [the company‘s] land, unless such action
    was required to pay the judgment to [the dissenters].‖).
    
                                      21
                                 URI v. MTC
                            Opinion of the Court
        ¶47 After reducing the value of the St. George real estate by 5.5
    percent for transaction costs, Mr. Smith further reduced the real
    estate‘s value to account for trapped-in capital gains taxes. This
    calculation required reducing the adjusted value of the real estate by
    37.3 percent67 of the difference between the real estate‘s adjusted
    value and its book value (the difference being the net appreciation of
    the real estate).
        ¶48 The district court rejected this deduction and held that it
    was impermissible because the sale of the St. George real estate was
    not ―imminent‖ as of the valuation date. As an additional basis for
    rejecting the deduction, the court held that it was ―improper to
    deduct capital gains tax liability in determining the fair value of
    dissenters‘ shares where the dissenters have already or will pay
    capital gains taxes on the appreciation of their shares.‖
        ¶49 The district court erred in rejecting this deduction because it
    again relied on inapplicable cases from other jurisdictions and
    because, as each appraiser recognized, it is a generally accepted
    financial technique to consider reasonably foreseeable taxes.
       ¶50 The court rejected the deduction for trapped-in capital gains
    based on the same caselaw68 it relied on in rejecting the discount for
    transaction costs, stating that the sale of the St. George real estate
    was not imminent, and thus discounts for future capital gains taxes
    would be too speculative. But each of those cases rejected use of a
    trapped-in capital gains deduction where the company had no plan
    to sell its assets prior to the triggering event.69 In contrast, it is
    
       67This percentage represents URI‘s estimated combined federal
    and state marginal tax rate.
       68 See Paskill Corp. v. Alcoma Corp., 
    747 A.2d 549
     (Del. 2000);
    Hansen, 
    957 P.2d 32
     (Mont. 1998); Trapp Family, 
    725 A.2d 927
     (Vt.
    1999); Brown, 
    141 P.3d 673
     (Wyo. 2006).
       69 Paskill, 747 A.2d at 552 (―The record reflects that a sale of its
    appreciated investment assets was not part of [the company‘s]
    operative reality on the date of the merger.‖); Hansen, 957 P.2d at 38
    (noting that the company ―exchanged substantially all of the
    property of the Corporation other than in the ordinary course of
    business‖); Trapp Family, 725 A.2d at 934 (―[T]he trial court correctly
    determined that no tax consequences of a sale of corporate assets
    should be considered where no such sale is contemplated.‖); Brown,
    141 P.3d at 688 (―As of [the triggering event] date, no sale of assets
    was contemplated.‖).
    
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                              Opinion of the Court
    
    undisputed here that URI‘s business plan before the share-
    consolidation transaction included selling all of its St. George real
    estate.
         ¶51 URI argues that most courts actually allow for consideration
    of trapped-in capital gains tax deductions where the taxes are
    incurred in the ordinary course of business and are unrelated to the
    triggering event. For instance, in Matthew G. Norton Co. v. Smyth, the
    Washington Court of Appeals rejected adopting a bright-line rule
    that would prohibit consideration of trapped-in capital gains taxes in
    all instances.70 Instead, the court stated that
             we believe . . . that while discounts for built-in capital
             gains are not generally appropriate in dissenters‘ rights
             appraisal cases where no liquidation of the corporation
             is contemplated, such discounts might be appropriate,
             at the corporate level, if the business of the company is
             such that appreciated property is scheduled to be sold
             in the foreseeable future, in the normal course of
             business.71
    The First Circuit Court of Appeals,72 several New York appellate
    courts,73 and the Colorado Court of Appeals74 have applied similar
    reasoning.
    
    
       70   
    51 P.3d 159
    , 169 (Wash. Ct. App. 2002).
       71 Id. at 168. The Dissenters‘ interpret the court‘s use of the word
    ―scheduled‖ to mean that an appreciated asset must be subject to a
    contract to sell before any built-in capital gain tax can be deducted in
    determining fair value. But this interpretation conflicts with the
    court‘s focus on whether an asset is merely ―contemplated‖ to be
    sold in ―the foreseeable future, in the normal course of business.‖ Id.
    Moreover, later in the opinion, the court clarifies by stating, ―we
    believe that facts that were known or could be ascertained as of the
    date of the merger that relate to disposition of a particular
    appreciated asset—such as contemplation of sale of the asset in accord with
    pre-existing planning in the normal course of business—are properly
    considered in determining net asset value.‖ Id. at 169 (emphasis
    added).
       72 Bogosian v. Woloohojian, 
    158 F.3d 1
    , 7 (1st Cir. 1998) (―The
    valuation of [the company] must include the expected tax liability
    that will be incurred on the three specifically planned sales and
    transfers and [the dissenting shareholder] will effectively shoulder
                                                             (continued)
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                                   URI v. MTC
                               Opinion of the Court
        ¶52 And although we have never expressly addressed whether
    deducting capital gains taxes is permissible, our caselaw supports
    doing so in certain contexts. As we explained in Oakridge Energy, Inc.,
    ―dissenting shareholders are entitled to receive the value of their
    holdings unaffected by the corporate action.‖75 That basic principle
    suggests that it would be appropriate to deduct trapped-in capital
    gains taxes in this case because URI‘s plan to sell its St. George real
    estate was implemented long before the triggering transaction. In
    fact, calculating fair value without considering the trapped-in capital
    gains taxes would give the Dissenters a windfall because had the
    triggering transaction never occurred, URI still would have sold its
    St. George real estate and paid the accompanying capital gains tax,
    
    
    
    one-third of the reduction. Any other decision would falsely inflate
    the value of [the company].‖). The Dissenters attempt to distinguish
    this case on the basis that it was a dissolution case and is therefore
    inapposite. But the fact that the case was originated by a petition for
    dissolution is immaterial because the corporation later decided to
    purchase the minority shareholder‘s shares, which triggered a fair
    value appraisal. Id. at 3.
       73 Murphy v. U.S. Dredging Corp., 
    903 N.Y.S.2d 434
    , 437 (App. Div.
    2010); Wechsler v. Wechsler, 
    866 N.Y.S.2d 120
    , 122–29 (App. Div.
    2008). Here again, the Dissenters attempt to distinguish Murphy by
    noting that it was a dissolution case. But in that case, as in Bogosian,
    the corporation elected to buy out the minority shareholders, which
    triggered a fair value appraisal. See Murphy, 903 N.Y.S.2d at 436.
       74  Walter S. Cheesman Realty Co. v. Moore, 
    770 P.2d 1308
    , 1312
    (Colo. App. 1988). The Dissenters contend that this case is
    inapplicable here because in Walter S. Cheesman Realty Co. the capital
    gains taxes were ―already owed as of the valuation date.‖ Although
    true, this fact made no difference in the court‘s reasoning. The court
    noted that ―the tax liability in question arose from the corporation‘s
    sale of its securities at a time unconnected with the corporate
    dissolution.‖ Id. In other words, the assets were sold in the ordinary
    course of business. The court‘s opinion does not focus on whether
    the capital gains tax was incurred before or after the triggering event,
    but instead on whether the tax was ―unconnected‖ to the triggering
    event. Id. This reasoning is equally applicable here given that the sale
    of URI‘s real estate was contemplated long before the share-
    consolidation transaction.
       75   937 P.2d at 134.
    
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    which would have necessarily affected the value of the Dissenters‘
    shares.
        ¶53 Moreover, it is a generally accepted, proper financial
    technique to consider trapped-in capital gains taxes in appraising the
    value of an asset that is to be sold. All three expert appraisers
    deducted the taxes in their assessments. Mr. Smith, the court-
    appointed appraiser, removed the deduction only after the district
    court sustained an objection by the Dissenters. The fact that three
    different financial appraisers all used the deduction in valuing URI
    suggests that it is a generally accepted, proper financial technique.
        ¶54 Finally, we note that the district court erred in requiring that
    an asset sale must be ―imminent‖ before the tax consequences of the
    sale can be an appropriate consideration in determining fair value.
    The district court applied an imminence standard based on its
    reading of Brown v. Arp & Hammond Hardware Co., a Wyoming
    Supreme Court case. But Brown itself does not require that an asset
    sale be imminent in order for a court to appropriately consider
    trapped-in capital gains. Rather, as noted above, Brown merely
    disallowed use of a trapped-in capital gains deduction where the
    discount ―was premised upon action contemplated by the
    corporation subsequent to (or because of) the reverse stock split.‖76
    The court neither discussed nor applied an imminence standard and
    the only reference to it comes in a long quotation from a law review
    article.
        ¶55 An asset sale need not be imminent in order to consider the
    sale in calculating fair value. Instead, courts have allowed
    consideration of an asset sale ―if the business of the company is such
    that appreciated property is scheduled to be sold in the foreseeable
    future, in the normal course of business.‖77 Moreover, as URI points
    out, an imminence standard would be especially unworkable
    because ―nearly all business valuations rely on assumptions about
    sales of assets, goods, or services that might occur years in the
    
       76   141 P.3d at 689.
       77 Smyth, 51 P.3d at 168; see Perlman v. Permonite Mfg. Co., 568 F.
    Supp. 222, 232, 232 n.3 (N.D. Ind. 1983) (holding that consideration
    of built-in capital gains taxes resulting from the sale of assets was not
    appropriate in that case because the corporation was not planning to
    liquidate, but noting that consideration of such taxes would be
    appropriate where ―property was for sale at the time of the
    [triggering event] and was eventually sold‖).
    
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                               Opinion of the Court
    future‖ and adoption of an imminence rule ―would effectively
    eliminate tax considerations‖ from the fair value calculation entirely.
        ¶56 The district court‘s additional basis for rejecting the trapped-
    in capital gains tax deduction is also flawed. The court reasoned that
    ―it is improper to deduct capital gains tax liability in determining the
    fair value of the dissenters‘ shares where the dissenters have already
    or will pay capital gains taxes on the appreciation of their shares.‖
    For this proposition, the district court cited the Washington Court of
    Appeals‘ decision in Smyth. But Smyth is inapplicable on this point
    because there the company had ―converted to Subchapter S status
    thereby avoiding the double taxation problems of C corporations.‖78
    That is not the case here. On the valuation date, URI was a
    subchapter C corporation and so was subject to taxation at the
    corporate level.79 The Dissenters would not be able to avoid double
    taxation in any event.
       ¶57 Deductions for trapped-in capital gains are appropriate
    where the taxes are reasonably foreseeable in the ordinary course of
    business. In this case, URI implemented a plan to sell appreciated
    real estate long before the triggering transaction took place.
    Accordingly, we hold that the district court erred in rejecting the tax
    deductions.
               C. The District Court Erred in Rejecting Tax Deductions on
                            URI’s Oil and Gas Royalty Interests
       ¶58 The district court erred in rejecting a deduction for income
    taxes on URI‘s oil and gas royalty interests. The court rejected the tax
    deduction because the ―tax deductions applied in this case are
    improper as a matter of law.‖ For that proposition, the court relied
    on the same cases from other jurisdictions that it relied on in
    prohibiting the discount for transaction costs and deduction for
    trapped-in capital gains. As an alternative basis for rejecting the
    deduction, the court concluded that the deduction was
    ―speculative.‖
    
       78   51 P.3d at 169.
       79  The Dissenters repeatedly suggest that URI could convert to a
    subchapter S corporation. But the Dissenters have not shown that
    this is in fact true given that federal law prohibits a corporation from
    electing S corporation status if the corporation has ―as a shareholder
    a person . . . who is not an individual.‖ 26 U.S.C. § 1361(b)(1)(B). And
    as of the valuation date, URI had nonindividual shareholders,
    including one of the Dissenters, MTC.
    
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       ¶59 In Mr. Smith‘s initial valuation, he valued URI‘s oil and gas
    royalty interests using an income approach. As he explained in his
    report,
            [t]he Income Approach estimates the Fair Value based
            on the cash generating ability of the Company. This
            approach quantifies the present value of the future
            economic benefits that Management expects to accrue
            to the Company. These benefits, or future cash flows,
            are discounted to the present at a rate of return that is
            commensurate with the Company‘s inherent risk and
            expected growth.
    Such an approach has long been accepted by courts as an acceptable
    valuation method.80
        ¶60 Taxes were relevant to Mr. Smith‘s analysis in two respects.
    First, to estimate URI‘s future net cash flows, he estimated future
    revenues from the royalty interests and then deducted associated
    expenses and income taxes on those revenues.81 Had Mr. Smith not
    factored in expected income taxes, URI‘s future cash flows would
    have been significantly overstated.
        ¶61 The last step of the income approach required Mr. Smith to
    apply a discount rate to URI‘s future cash flows. This is the second
    instance where URI‘s marginal tax rate was relevant in his analysis.
    A common method for determining the applicable discount rate is to
    use the Capital Asset Pricing Model.82 And one component of that
    
    
       80 See Steiner Corp. v. Benninghoff, 
    5 F. Supp. 2d 1117
    , 1129 (D. Nev.
    1998) (describing the discounted cash flow method as ―generally
    accepted by courts faced with valuation cases‖); Cede & Co. v.
    Technicolor, Inc., Civ. A. No. 7129, 
    1990 WL 161084
    , *7 (Del. Ch.
    Oct. 19, 1990) (―In many situations, the discounted cash flow
    technique is in theory the single best technique to estimate the value
    of an economic asset.‖).
       81 See Steiner Corp., 5 F. Supp. 2d at 1131 (―[T]he correct cash flow
    figure to discount should be calculated on an after-tax, debt-free
    basis.‖).
       82See id. at 1132–33 (―Probably the most accepted way to calculate
    the discount rate, at least for discounting cash flows, is the Capital
    Asset Pricing Model . . . .‖); In re Radiology Assocs., Inc. Litig., 
    611 A.2d 485
    , 492 (Del. Ch. 1991) (noting that the Delaware Court of
    Chancery ―has affirmed the general validity of [the Capital Asset
                                                               (continued)
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                                   URI v. MTC
                              Opinion of the Court
    model requires calculation of a company‘s weighted average cost of
    capital (WACC). Described simply, WACC is ―the cost of equity
    times the percentage of equity in the capital structure plus the cost of
    debt times that percentage of debt.‖83 The cost-of-debt component of
    WACC requires an appraiser to determine the after-tax rate of return
    on debt capital, which necessarily requires consideration of the
    applicable tax rate. To correctly calculate URI‘s cost of debt, Mr.
    Smith had to factor in URI‘s marginal tax rate; otherwise, the
    calculation would have been incorrect.
        ¶62 In sum, not only is it appropriate to consider tax rates in
    conducting an income approach valuation, it is necessary. The
    mathematical calculations used by finance professionals cannot be
    properly performed without consideration of taxes. Mr. Smith
    recognized this fact in his testimony, as illustrated by the following
    colloquy on cross-examination between Mr. Smith and Mr. White,
    URI‘s attorney:
            Mr. White: Well, shouldn‘t you have used a different
            discount rate when you are trying to capitalize pretax
            income stream?...
            Mr. Smith: I think the way I did it, originally, was
            where I took out taxes and the discount rate I used was
            an after-tax rate, and so I think if you just adjust it for
            the tax, that essentially is going contradictory to the
            ruling, so I stuck with the same discount rate.
            Mr. White: Okay. I understand how you got –
            Mr. Smith: You get the same value –
            Mr. White: Well, you don‘t exactly, because in the real
            world are there different discount rates that are applied
            to pretax cash flows as opposed to post tax cash flows?
            Mr. Smith: In theory you should get the same answer
            whether you‘re using a pretax discount rate or a post
            tax discount rate.
    
    
    
    
    Pricing Model] approach for estimating the cost of capital
    component in the discounted cash flow model‖).
       83Cede & Co. v. JRC Acquisition Corp., Civ. A. No. 18648-NC, 
    2004 WL 286963
    , *7 (Del. Ch. Feb. 10, 2004) (internal quotation marks
    omitted).
    
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             Mr. White: I thought discount rates for pretax had to be
             higher, simply because they were pretax.
             Mr. Smith: Right. Correct.
             Mr. White: Well, since this was a pretax revenue stream
             in your amended report –
             Mr. Smith: Uh-huh (affirmative).
             Mr. White: -- shouldn‘t you have figured 13 percent, a
             little higher?
             Mr. Smith: Well, I think that – again, I mean, if you‘re
             talking strictly valuation theory, I would agree with
             you. If you‘re talking about fair value standard and the
             Court‘s rulings, I can‘t speak to that.
        ¶63 In essence, in Mr. Smith‘s amended appraisal, he applied an
    erroneous income approach because he was obligated to follow the
    district court‘s instructions to not consider any taxes. As his
    testimony suggests, this is simply the wrong way to perform income
    valuation. Mr. Smith should have either applied a post-tax discount
    rate to the post-tax revenue stream (as he did in his initial valuation),
    or applied a pre-tax discount rate to pre-tax revenue numbers. The
    district court required that he do neither and instead had him apply
    a post-tax discount rate to a pre-tax revenue stream. This is an
    improper financial technique under any standard.
        ¶64 The cases relied on by the district court are not to the
    contrary. As previously noted, those cases rejected consideration of
    trapped-in capital gains taxes where a company had no plans of
    selling its assets before the triggering event.84 But those cases do not
    support application of a blanket rule that taxes can never be
    considered in performing an income approach valuation.
        ¶65 The district court‘s alternative basis for rejecting the tax
    deductions is also unpersuasive. The court concluded that the
    deduction was speculative because ―URI never paid 37.3 percent in
    taxes in the five years before the valuation date.‖ This reasoning is
    flawed in two aspects. First, it overlooks the fact that a company may
    ultimately have no tax liability even if it engages in individual
    transactions that are subject to tax. For instance, the company may
    have offsetting credits that net out taxes incurred in other
    
    
    
       84   Supra ¶ 50.
    
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                                Opinion of the Court
    transactions.85 Second, URI points out that its ―tax history [is]
    misleading because [the company] had heavy operating losses and
    thus low or no taxable profits.‖ In fact, the company‘s prior financial
    difficulties led it to adopt the business strategy of selling its real
    estate holdings. In valuing the company, the appraisers made the
    reasonable assumption that over the course of ten years the company
    would successfully sell its real estate. And the appraisers explained
    in their testimony that it is standard valuation practice to use
    marginal tax rates in valuing a company, not historical tax rates.
       ¶66 In sum, the district court erred by overriding Mr. Smith‘s
    use of the generally-accepted discounted cash flow model, a model
    which necessarily requires consideration of marginal tax rates, and
    by holding that consideration of taxes was improper as a matter of
    law.
            D. The District Court Erred in Rejecting Application of a Minority-
                         Interest Discount on URI’s Interest in HHA
       ¶67 On the valuation date, URI owned a minority interest in a
    separate company, HHA. URI‘s minority stake in HHA was properly
    accounted for as an asset on URI‘s books. Each of the appraisers
    discounted its value, however, because URI, as a minority
    shareholder, lacked control over HHA. The district court concluded
    that the discount was an impermissible marketability discount and
    required Mr. Smith, in his amended valuation, to remove the
    discount. We conclude that the court erred in construing the
    discount as an impermissible marketability discount.
        ¶68 The district court determined that the discount was
    impermissible under our decision in Hogle. Specifically, the court
    cited our reasoning in Hogle where we noted that ―a majority of
    courts that have addressed the issue of minority discounts has held
    that discounts at the shareholder level are inherently unfair to the
    minority shareholder who did not pick the timing of the transaction
    and is not in the position of a willing seller.‖86 Because dissenting
    shareholders are unwilling sellers, we concluded that courts ―should
    not employ discounts in . . . valu[ing] . . . the Minority‘s shares of
    [the company].‖87
    
       85This case demonstrates the point. Mr. Smith testified that URI
    was able to reduce its tax liability for several years by using net
    operating loss carryforwards.
       86   
    2002 UT 121
    , ¶ 45 (internal quotation marks omitted).
       87   Id. ¶ 46.
    
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       ¶69 Although, the district court correctly recognized that courts
    should not employ a marketability discount with respect to a
    dissenter‘s interest, the court erroneously extended this principle to
    discounts on assets held by the company generally. The
    impermissible marketability discounts we referred to in Hogle were
    those minority discounts that apply at the shareholder level, not
    those that apply at an asset level. As we stated in Hogle, the reason
    we reject minority discounts is that ―discounts at the shareholder
    level are inherently unfair to the minority shareholder.‖88
       ¶70 That is not the situation here. None of the appraisers
    discounted the Dissenters‘ interest in URI based on their minority
    position. Rather, the appraisers discounted an asset held by URI.
    URI‘s lack of control over HHA affected each URI shareholder,
    majority and minority, on a pro rata basis. The Dissenters were not
    uniquely affected by the discount and so the discount was not
    ―inherently unfair.‖
                                   Conclusion
       ¶71 We first hold that URI did not waive its right to appeal by
    partially paying the judgment against it. URI never fully satisfied the
    judgment and has expressly reserved its right to appeal throughout
    the proceedings. As to the merits of the case, we hold that the district
    court erred in its fair value determination. Specifically, the court
    erred in rejecting the challenged deductions by relying on
    inapplicable caselaw from other jurisdictions and by misconstruing
    the deductions as impermissible marketability deductions.
    Accordingly, we vacate the court‘s ruling and remand for
    proceedings consistent with this opinion.
    
    
    
    
       88   Id. ¶ 45 (internal quotation marks omitted).
    
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