Irene Eisenberg - Page 12

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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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