- 34 -
(1993); Messing v. Commissioner, 48 T.C. 502, 512 (1967); sec.
20.2031-1(b), Estate Tax Regs. Fair market value may be affected
by future events that were reasonably foreseeable at the valuation
date. Estate of Gilford v. Commissioner, 88 T.C. 38, 52 (1987);
Gray v. Commissioner, 2 B.T.A. 672, 682 (1925); Estate of Livermore
v. Commissioner, T.C. Memo. 1988-503.
Determining the fair market value of a closely held
corporation's capital stock is difficult because it involves
property that has no public market. The best method for valuing
closely held stock is by reference to an actual arm's-length sale
of the stock in the normal course of business within a reasonable
time before or after the valuation date. See Estate of Andrews v.
Commissioner, 79 T.C. 938, 940 (1982); Estate of Campbell v.
Commissioner, T.C. Memo. 1991-615; sec. 20.2031-2(b), Estate Tax
Regs. In the absence of an arm's-length sale, the fair market
value of closely held stock must be determined indirectly by
considering, inter alia:
(a) The nature of the business and the history of the
enterprise from its inception.
(b) The economic outlook in general and the condition and
outlook of the specific industry in particular.
(c) The book value of the stock and the financial
condition of the business.
(d) The earning capacity of the company.
(e) The dividend paying capacity [of the company].
Page: Previous 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 NextLast modified: May 25, 2011