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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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