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formula, because we thought that much of the company’s value was
attributable to goodwill. Similarly, we question the
reasonableness of omitting the value of proven oil and gas
reserves from True Oil’s buy-sell pricing formula, given that
those reserves represent the focus of the business and its most
valuable asset. Dave True’s stated reasons for using book value
were to avoid the need for appraisals and to provide an easily
determinable price in order to prevent future conflicts within
the family. However, as we stated in Lauder II, supra: “while
we appreciate that an adjusted book value formula may provide a
simple and inexpensive means for evaluating shares in a company,
we cannot passively accept such a formula where, as here, it
appears to have been adopted in order to minimize or mask the
true value of the stock in question.” Lauder II, T.C. Memo.
1992-736, 64 T.C.M. (CCH) 1643, 1659, 1992 T.C.M. (RIA) par.
92,736, at 92-3732 (citing Estate of Trammell v. Commissioner, 18
T.C. 662 (1952)).
g. No Periodic Review of Formula Price
The True companies’ buy-sell agreements did not provide a
mechanism for periodic review or adjustment to the tax book value
formula. Over the years, the buy-sell agreements were amended on
several occasions. The 1984 amendments, which affected all buy-
sell agreements and related to Tamma Hatten’s withdrawal, made
only minor changes to the tax book value formula price
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