- 13 -
condemnation award qualifies under section 1033 for
nonrecognition of gain. Respondent alternatively argues that
$908,750 (rather than $1,114,500 as shown in the notice of
deficiency) of the award is taxable to Beverly, $800,000 as a
payment for its going concern and $108,750 as a payment for its
covenants, and that $108,750 of the award is taxable to MIC as a
payment for its covenants. Under her alternative argument
respondent does not contest that $820,000 of the condemnation
award qualified under section 1033 for nonrecognition of gain.
We disagree with both of respondent's arguments. We decline
to allocate any part of the award away from the Property because
we find that the award is not significantly in excess of the fair
market value of the Property. Fair market value is a question of
fact. Commissioner v. Scottish Am. Inv. Co., 323 U.S. 119, 123-
125 (1944); Helvering v. National Grocery Co., 304 U.S. 282, 294
(1938). Fair market value represents the price that a willing
buyer would pay a willing seller, both persons having reasonable
knowledge of all relevant facts and neither person being
compelled to buy or to sell. United States v. Cartwright, 411
U.S. 546, 551 (1973); Estate of Hall v. Commissioner, 92 T.C.
312, 335 (1989). The willing buyer and the willing seller are
hypothetical persons, instead of specific individuals or
entities, and the characteristics of these hypothetical persons
are not necessarily the same as the personal characteristics of
the actual seller or a particular buyer. Estate of Bright v.
Page: Previous 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 NextLast modified: May 25, 2011