- 194 -
approach. Mr. Gustavson also used an investment recovery method
to value plant and pipeline facilities.
The Gustavson report valued True Oil’s major assets at
$48,000,000 on January 1, 1993, and $33,700,000 on June 4, 1994.
Subsequently, Mr. Gustavson reconciled his valuation
methodologies with those of Dr. Caldwell62 to arrive at the True
Oil stipulated asset values of $39,650,000 as of January 1, 1993,
and $34,200,000 as of June 4, 1994. See supra p. 156. According
to respondent, the value of True Oil’s major assets represented
the 100-percent equity value of the company.
Because Mr. Gustavson is not an expert in business
valuations, he did not value the subject interests in any True
company. Instead, respondent argues on brief that the True Oil
interests transferred by Dave and Jean True to their sons as of
January 1, 1993 (Dave transferred an 8.28-percent interest to
each son), and June 30, 1994 (Jean transferred a 5.74-percent
interest to each son), were entitled to minority discounts of no
more than 10 percent.63 Respondent bases his conclusions on a
62The Scotia reports also valued oil and gas properties
owned by True Oil as of Jan. 1, 1993, and June 4, 1994. Dr.
Caldwell primarily relied on the discounted cash-flow method to
value True Oil’s proved reserves and other facilities, and
applied the comparative sales method to test the reasonableness
of those results. The Scotia reports concluded that the fair
market value of True Oil’s major assets was $34,800,000 on both
valuation dates.
63Petitioners interpreted respondent’s statements on brief
to mean that respondent was allowing combined minority and
(continued...)
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