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petitioners’ tax counsel in early 1992 and concluded that the
discounted per-share value of the 1988 stock transfer was
$167.98.2 After receiving Chaffe’s report, and based upon his
finding of a lower discounted per-share value, petitioners’ tax
counsel prepared, and petitioners filed, amended Federal gift tax
returns for 1988. Mr. Rabenhorst’s amended return requests a
refund of $1,465.11, while Mrs. Rabenhorst’s amended return
requests a refund of $971.62.
Respondent determined that the discounted per-share value of
the 1988 stock transfer was $445. Accordingly, respondent
further determined a gift tax deficiency against each petitioner
in the amount of $33,833 for 1988.
OPINION
Section 2501(a) provides the general rule that Federal gift
tax will be imposed upon the value of property transferred by
gift during each calendar year. The value of a gift of stock is
the stock’s fair market value on the date the gift is made. Sec.
2512(a); sec. 25.2512-2(a), Gift Tax Regs. Fair market value is
defined generally as the price at which such property would
change hands between a willing buyer and a willing seller,
neither being under any compulsion to buy or to sell, and both
having reasonable knowledge of relevant facts. United States v.
2The Chaffe appraisal was subsequently revised to adjust for
computational errors. The revised report concludes that the
discounted per-share value of the 1988 stock transfer was
$176.13.
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