Irene Eisenberg - Page 10
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because it is unlikely they will ever be incurred." Estate of
Andrews v. Commissioner, supra at 942 (emphasis added).
In sum, the primary reason for disallowing a discount for
capital gain taxes in this situation is that the tax liability
itself is deemed to be speculative. Specifically, in the above
cases, there was a failure to show the requisite likelihood that
the beneficiaries would liquidate the corporation or sell the
underlying assets and incur the tax and other expenses. Further,
there was no showing that a hypothetical willing buyer would
desire to purchase the stock with the view toward liquidating the
corporation or selling the assets, such that the potential tax
liability would be of material and significant concern.7
Petitioner contends that Estate of Piper v. Commissioner,
supra at 1087, and Estate of Luton v. Commissioner, T.C. Memo.
7In Ward v. Commissioner, 87 T.C. 78, 104 (1986), this Court
summarized its position as follows:
there is no evidence that the liquidation of the entire
corporation is imminent or even contemplated. Under
such circumstances, "We need not assume that conversion
into cash is the only use available to an owner, for
property which we know would cost him market value to
replace." Estate of Cruikshank v. Commissioner, 9 T.C.
162, 165 (1947). A hypothetical willing buyer of the
shares in an arm's-length sale could expect no
reduction in price for sales expenses and taxes that he
might incur in a subsequent sale of either the shares
or the corporation's underlying assets. When
liquidation is only speculative, such costs are not to
be taken into account. Estate of Andrews v.
Commissioner, 79 T.C. at 942; Estate of Piper v.
Commissioner, 72 T.C. 1062, 1086-1087 (1979); Estate of
Cruikshank v. Commissioner, supra. [Fn. ref. omitted.]
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