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use of market data was established early in the development of
the tax law by the Court of Appeals for the Third Circuit in
Heiner v. Crosby, 24 F.2d 191, 193 (3d Cir. 1928), with respect
to shares of stock:
The fair market price or value of stock at a
particular time is a question of fact, to be determined
from all the circumstances. Market price implies the
existence of a market, of supply and demand, of sellers
and buyers. Sales are always evidence of a market
price, but the statute requires that, in “ascertaining
the gain derived from the sale,” there must be not
simply a “market price,” but a “fair market price.”
Sales made at a particular time and place may be
significant, but the price paid is not necessarily
decisive of fair market price or value. The fact of
sales, in itself and without regard to the
circumstances under which the sales were made, does not
conclusively establish either statutory fair market
price or value. Sales made under peculiar and unusual
circumstances, such as sales of small lots, forced
sales, and sales in a restricted market, may neither
signify a fair market price or value, nor serve as the
basis on which to determine the amount of gain derived
from the sale. In such cases resort must be had to
evidence to determine “fair value.” Offers made in
good faith and opinions of intelligent men experienced
in the business are admissible to show fair value.
* * *
Accord, e.g., Berry Petroleum Co. & Subs. v. Commissioner,
104 T.C. 584, 637-638 (1995) (generally, best evidence of value
is actual sales: “However, prices obtained at forced sales, at
public auctions, or in restricted markets may not be the best
criteria of value, particularly when other evidence shows that
the property would sell at a higher price under different
circumstances.”).
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