                   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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                        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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                        Opinion of the Court

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)
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                                 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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                           Opinion of the Court

         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).

                                     17
                              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).

                                   19
                               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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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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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)
                                 23
                               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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                           Opinion of the Court

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‖).

                                   25
                                URI v. MTC
                           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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                          Cite as: 2014 UT 59
                         Opinion of the Court

   ¶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)
                                   27
                               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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                          Opinion of the Court

         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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                                 URI v. MTC
                            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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                           Cite as: 2014 UT 59
                           Opinion of the Court

   ¶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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