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corporation is liquidated, capital gain taxes will be imposed at
the corporate level. Moreover, petitioner states that any
"willing buyer" of the corporate stock, having "reasonable
knowledge" of the applicability of the capital gain taxes, would
reduce the price paid for the stock by the full amount of the
tax. Sec. 25.2512-1, Gift Tax Regs. Thus, petitioner argues
that this change in the law justifies the allowance of a discount
for potential taxes.
In contrast, respondent counters that a hypothetical buyer
possesses the option of avoiding the imposition of any capital
gain taxes through the purchase of corporate stock and the
continuation of the business of leasing the property in question
through the corporate form. Thus, respondent asserts that any
individual or entity may indefinitely defer taxes. Additionally,
respondent argues that there are several transactions in which
the corporation may transfer the property to a new corporation in
exchange for the new corporation's stock and thus avoid the
recognition of gain. See e.g., secs. 351 and 355.
We agree with respondent that a discount for capital gain
taxes does not apply here. As noted, we have held that a
discount for potential costs of sale or liquidation, whether in
the nature of selling expenses or income taxes that might be
incurred, is inappropriate where the sale or liquidation is
itself speculative.
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