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buy-sell agreement, the fair market value of their shares on
August 2, 1971, was the book value calculated under the buy-sell
agreement, or $38.69 per share.
SRC generally followed the same methodology in valuing the
partnership interests in True Oil transferred by Dave True as of
August 1, 1973. However, instead of using the book value
approach, SRC used the net asset value (NAV) approach combined
with the earnings approach. This required a two-step process:
(1) Marking the balance sheet to market to derive NAV, and
(2) applying a discount to NAV based on comparable public
companies’ ratios of price to NAV. After again assigning greater
weight to the earnings approach, SRC determined the freely traded
value of an 8-percent interest in True Oil to be $535,000
(rounded) on the valuation date. Finally, SRC applied the same
lack of public market rationale, as in its Belle Fourche
appraisal, to disregard the freely traded value and to conclude
that fair market value was limited to the buy-sell agreement
formula price, or $54,653 for an 8-percent interest.
D. Tamma Hatten’s Withdrawal From True Companies
Tamma Hatten had never shown an avid interest in
participating in the True family businesses, and her husband had
played a relatively minor role in the management of the True
companies. On July 23, 1984, when Tamma Hatten was 44 years old,
she notified her family (in writing) of her intent to withdraw
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