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oil and gas exploration company. In his opinion, book value
would not reflect fair market value because the current value of
proven oil and gas reserves would not be accounted for on the
company’s books. However, in True Oil’s situation, revenues
generated through production extracted from those reserves, and
revenues from other True companies, were being plowed back into
True Oil. He believed that the constant expenditure of True
Oil’s (and other True companies’) resources to fund new and often
unsuccessful exploratory drilling absorbed the unbooked value of
the oil and gas reserves over time. Mr. Harris reasoned that on
a going-concern basis, True Oil’s book value closely approximated
fair market value at the date of the gifts. He indicated that
this would not be the case if True Oil were being valued on a
liquidating basis.
Mr. Harris’s expertise was in accounting, and he was well
acquainted with the True companies’ operations. The record
indicates that Mr. Harris was the only professional with whom
Dave True consulted in selecting the book value formula price.
However, Mr. Harris stated that he did not have a detailed
understanding of valuation methodologies, as he had no academic
or practical experience in the valuation area. On Mr. Harris’s
recommendation, Dave True obtained the B. Allen report, which
appraised True Oil’s reserves, before transferring 8-percent
interests to the True children. However, Mr. Harris indicated
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