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that Waldorf's sale of his share of the note to Darlene Wiltzius
was at arm's length and for fair market value. We agree with
Brandon that the sale from Waldorf to Darlene Wiltzius was at
arm's length; however, we believe that Waldorf was under a
compulsion to sell. Waldorf testified that he sold the note
because he owed creditors, he had no other income, the mortgage
on his house was about to be foreclosed, and he believed the IRS
would take the proceeds paid by the buyers on the note. We
believe that Waldorf's sale to Darlene Wiltzius was a forced sale
for less than fair market value.
Brandon estimated the value of the $425,000 part of the
note; he did not consider the $100,000 payment. He admitted at
trial that the $100,000 payment would increase the value of the
note but said that this effect was offset by a lack of payment
history. We do not believe that factor fully offsets the fact
that Brandon did not consider the $100,000 payment. We conclude
that Brandon underestimated the value of the note.
Respondent contends that the note is worth its face value.
Respondent relies on the expert testimony of Jack Shelton
(Shelton). He did not consider the price paid in the arm's-
5(...continued)
Commissioner, 88 T.C. 1197, 1233 (1987).
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