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that have been held by the unitholder or the unitholder’s family
continuously for at least 5 years, or (2) 90 percent of units
held by all partners. Petitioner was not a partner in the
Partnership and received no partnership units.
On December 20, 1985, descendants of the founding families
owned 34.36 percent of the outstanding stock of petitioner--the
Pope family owned 21.04 percent, and the Andrews family owned
13.32 percent. They received corresponding percentages of
partnership units. Peter T. Pope and Adolphus Andrews, Jr., were
members of the board of directors of petitioner, and Mr. Pope was
the chairman of the board and the chief executive officer.
Discussion
The first issue we must decide is the fair market value of
the Washington properties transferred by petitioner to the
Partnership. Fair market value is traditionally defined as 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 to sell and both having reasonable knowledge of relevant
facts. United States v. Cartwright, 411 U.S. 546, 551 (1973);
Buse v. Commissioner, 71 T.C. 1129, 1135 (1979). The standard is
objective, using a purely hypothetical willing buyer and seller.
Propstra v. United States, 680 F.2d 1248, 1251-1252 (9th Cir.
1982); Estate of Newhouse v. Commissioner, 94 T.C. 193, 218
(1990). However, the hypothetical sale should not be constructed
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