Estate of H.A. True, Jr. - Page 171




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          maintain disproportionate capital accounts, the two approaches              
          are fundamentally inconsistent.  To the extent that the                     
          partnership agreement defines the interest being transferred, we            
          doubt that Mr. Kimball has valued the correct interest.  As a               
          general matter, we are also concerned with the anomalous economic           
          results75 that have occurred due to the allowance of                        
          disproportionate capital accounts.                                          
              We account for the abovementioned concerns in our                       
          determination of marketability discounts.                                   
                  2. Marketability Discounts                                          
                      a. Kimball Reports                                              
              Mr. Kimball treated the subject interests in Eighty-Eight               
          Oil as not being readily marketable for the same reasons                    


               75We note again that in 1984, Tamma Hatten had to reduce her           
          proceeds from the sales of other True companies in order to sell            
          her interest in “cash cow” Eighty-Eight Oil because of her                  
          negative ending capital account.  Also, Dave True’s unusually low           
          capital balance at the effective date of the 1993 transfers                 
          arguably created an additional gift to his sons, because the True           
          sons only paid what amounted to 5.86 percent of total partners’             
          capital ostensibly to purchase the right to an additional 24.84             
          percent of profits, losses, and partners’ capital.  It would                
          appear that Dave True’s unusual (the day before the sale)                   
          contribution to partners’ capital of more than $6 million was               
          intended to avoid a sale at a price so low in relation to overall           
          book value of partners’ capital and the percentage interest in              
          profits being sold as to be impossible to justify with even a               
          semblance of a straight face.  Petitioners argue on brief that              
          Dave True “substantially restored” his disproportionate capital             
          account before the 1993 transfers because Eighty-Eight Oil                  
          required the extra cash to conduct its business.  We are                    
          unconvinced by petitioners’ justifications, and we note that Dave           
          True’s capital account remained disproportionately low even after           
          the allegedly “substantial” restoration.                                    




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