Estate of H.A. True, Jr. - Page 211




                                       - 282 -                                        
              We accept the agreement of the parties that controlling                 
          equity value on a net asset basis was $1,139,080 as of June 3,              
          1994.  However, we reject respondent’s swing vote argument, for             
          the reasons stated in our analysis of True Oil.  See supra pp.              
          201-202.                                                                    
              We find the final Lax report’s combined discount of 60                  
          percent to be excessive and unsubstantiated.  Mr. Lax solely                
          relied on sales of registered real estate limited partnership               
          interests as benchmarks for the discount he applied to White                
          Stallion.  However, we do not believe that registered real estate           
          limited partnerships are comparable to White Stallion, an                   
          operating dude ranch organized as an S corporation.  Further, we            
          cannot evaluate the reasonableness of the final Lax report’s                
          minority discount relative to Mr. Kimball’s, because of Mr. Lax’s           
          combined discount approach.  We are not convinced that using a              
          combined discount is appropriate, inasmuch as marketability and             
          minority discounts are conceptually distinct.  See Estate of                
          Newhouse v. Commissioner, 94 T.C. at 249.                                   
              The final Lax report did not discuss the requirements for               
          control under Arizona law or White Stallion’s governing documents           
          before concluding that Dave True’s interest lacked control.  In             
          addition, Mr. Lax did not provide a theoretical basis for his               
          change in approach to calculating discounts (going from separate            
          to combined discounts) between the initial and final Lax reports.           
          This makes Mr. Lax’s conclusions seem arbitrary.                            





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