Nathan P. and Geraldine V. Morton - Page 22

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             The parties agree that petitioners were eligible to make                 
             an election under section 83(b) with regard to their SWI                 
                  The sole dispute between the parties to this case is                
             over the fair market value of the stock at the time of the               
             purchase, June 30, 1989.  In their section 83(b) election,               
             petitioners claimed that the fair market value of the stock              
             was $60.98 per share, the price petitioner paid for his 500              
             shares.  In the notice of deficiency, respondent determined              
             that the fair market value of the stock was $1,739.82 per                
             share, and that petitioners' 1989 taxable income should                  
             therefore be increased in the amount of $839,420 (i.e.,                  
             $1,739.82 minus $60.98 times 500).  In a report prepared                 
             for trial, petitioners' expert valued the stock at $55 per               
             share.  At trial, respondent's expert testified that the                 
             stock was worth $1,798 per share.                                        
                  Generally, fair market value is "the price at which                 
             the property would change hands between a willing buyer                  
             and a willing seller, neither being under any compulsion                 
             to buy or sell, and both having reasonable knowledge of                  
             the relevant facts."  United States v. Cartwright, 411                   
             U.S. 546, 551 (1973) (quoting section 20.2031-1(b),                      
             Estate Tax Regs.); see also Culp v. Commissioner, T.C.                   
             Memo. 1989-517 (applying this standard to a section 83(b)                

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