-59-
of petitioner's 14.361-percent equity interest in PCC,36 including
any possible marketability discount attributable to that interest.
We reject petitioner's argument that Rev. Rul. 87-124, 1987-2 C.B.
205, supports its position.
At this point, we must address petitioner's argument that the
$12,577,136 of blocked deposits had a secondary market value of
$7,923,596. We agree with respondent that the value of the blocked
deposits on the secondary market is irrelevant to this case.
Petitioner did not engage in a transaction on the secondary
36 Assuming arguendo that the step transaction doctrine
applies, we would hold that the PCC stock had a $12.5 million
fair market value on Apr. 14, 1987, based upon the following:
After considering for several months whether to invest in
PCC, petitioner concluded that the 14.361-percent equity interest
was worth $12.5 million. Petitioner negotiated the purchase of
the PCC stock with IFC (an unrelated party, which has a strong
institutional incentive to charge a fair price) at arm's length,
even though the Latin American debt crisis placed petitioner in a
position with limited options. Petitioner was not under a
compulsion to buy. In fact, two of petitioner's experts
testified that if we find that IFC sold its stock in an arm's-
length transaction and petitioner was not under a compulsion to
buy, the price at which the transaction occurred would provide
the best evidence of fair market value. The amount paid for
property generally is probative evidence of its fair market
value. See, e.g., United States v. Cartwright, 411 U.S. 546, 551
(1973).
Just 2 days after petitioner acquired the interest in PCC,
Phil Williams, NBM's chief financial officer, concluded that the
fair market value of the PCC stock was between $12.4 and $12.6
million. He reached this conclusion after analyzing and revising
the study prepared by Norwest Corporate Finance. We consider
petitioner's subsequent reductions in value for financial
reporting purposes not relevant to the purchase-date fair market
value of the PCC stock.
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