Irene Eisenberg - Page 6

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          being under any compulsion to buy or to sell, and both having a             
          reasonable knowledge of the relevant facts.  United States v.               
          Cartwright, 411 U.S. 546, 551 (1973); sec. 25.2512-1, Gift Tax              
               Here, the parties have agreed that the net asset value                 
          method is appropriate for the valuation of the stock of the                 
          corporation.  They are also in agreement as to the fair market              
          value of the property in question and the valuation of the shares           
          as reported on petitioner's Federal gift tax returns.  The                  
          parties further agree that the corporation would have recognized            
          capital gains in the amount of $530,500, $402,094, and $402,892             
          for the taxable years 1991, 1992, and 1993, respectively, if the            
          property had been disposed of in a taxable disposition (built-in            
          capital gain).  However, the parties diverge on whether, in                 
          arriving at the corporation's net asset value, adjustments should           
          be made to reflect costs that would, potentially, be incurred if            
          its assets were liquidated.                                                 
               Petitioner contends that, for gift tax purposes, she is                
          entitled to take into account the full amount of capital gain               
          taxes to reduce the fair market value of the stock of the                   
          corporation.  Simply put, petitioner argues that a willing                  
          purchaser of the corporate stock would have discounted the                  
          otherwise applicable fair market value because of the income tax            
          liability inherent in the aforementioned property.  The parties             

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