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The Fifth Circuit very succinctly stated the basis for its
holding in the following language:
Brief as is the instant of death, the court must
pinpoint its valuation at this instant--the moment of
truth, when the ownership of the decedent ends and the
ownership of the successors begins. It is a fallacy,
therefore, to argue value before--or--after death on
the notion that valuation must be determined by the
value either of the interest that ceases or of the
interest that begins. Instead, the valuation is
determined by the interest that passes, and the value
of the interest before or after death is pertinent only
as it serves to indicate the value at death. In the
usual case death brings no change in the value of
property. It is only in the few cases where death
alters value, as well as ownership, that it is
necessary to determine whether the value at the time of
death reflects the change caused by death, for example,
loss of services of a valuable partner to a small
business. [303 F.2d at 172; emphasis in original.]
We think "the interest that passes" in the case before us is
the value of the shares unencumbered by the securities act
restrictions; i.e., $15.56 per share. As stated earlier, this is
the value agreed to by the parties if the securities law
restrictions applicable to decedent are disregarded for Federal
estate tax valuation purposes, as we think they must be. As
stated in the Land case, in the few cases where death alters
value, it is necessary to determine whether the value at the time
of death reflects the change caused by death. In our case, the
change in value was caused by death because at the instant of
death, the securities law restrictions no longer applied. The
valuation depressant occasioned by the securities law
restrictions during decedent's lifetime became interesting
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