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influenced Mr. Kimball’s choice of multiples. As stated earlier,
restrictive provisions of buy-sell agreements that are deemed to
be testamentary devices should be disregarded in determining fair
market value for estate and gift tax purposes. See supra p. 152.
Adjustments for these errors would result in marketable minority
values higher than those derived by Mr. Kimball.
The final Lax report’s guideline company analysis was even
more questionable. It provided no data to support the
calculations of EBDIT, EBIT, pretax earnings, and book value for
either the comparable companies or True Oil. Further, Mr. Lax
did not explain the relative weight placed on each factor. The
Lax report also applied market multiples to only 1 year’s worth
of financial data. We believe that using a 5-year average of
True Oil’s financial fundamentals (as Mr. Kimball did) would have
provided more representative results. Without more data and
explanations, we cannot rely on the final Lax report’s valuation
conclusions using the guideline company method.
We need not discuss the strengths or weaknesses of Mr. Lax’s
reserves method because the parties stipulated the value of True
Oil’s reserves as of the relevant measurement dates.
Regarding the issue of minority discounts, this Court
recognizes that a minority interest in a company usually is worth
less than a proportionate share of the company’s total value, see
Ward v. Commissioner, 87 T.C. at 106; Estate of Andrews v.
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