- 36 -
3 T.C. 963, 970-971 (1944); Estate of McKitterick v. Commissioner,
42 B.T.A. 130, 136-137 (1940); sec. 20.2031-2(e), Estate Tax Regs.;11
sec. 25-2512-2(e), Gift Tax Regs. (language similar to that in sec.
20.2031-2(e), Estate Tax Regs.). In other words, the quoted price
for shares of a certain type of stock generally reflects the selling
price of a relatively small number of those shares, and the presence
on the market of a sufficiently large number of those shares tends to
depress the quoted price. The market can handle only a certain
number of shares of a given stock at a quoted price, and, when a
seller attempts to sell more shares than the market can handle, the
large block of shares tends to flood the market, forcing the seller
to accept a price for all shares that is less than the price set by
11 As stated in sec. 20.2031-2(e), Estate Tax Regs.:
Where sales at or near the date of death are few or of
a sporadic nature, such sales alone may not indicate
fair market value. In certain exceptional cases, the
size of the block of stock to be valued in relation to
the number of shares changing hands in sales may be
relevant in determining whether selling prices reflect
the fair market value of the block of stock to be
valued. If the executor can show that the block of
stock to be valued is so large in relation to the
actual sales on the existing market that it could not
be liquidated in a reasonable time without depressing
the market, the price at which the block could be sold
as such outside the usual market, as through an
underwriter, may be a more accurate indication of value
than market quotations. * * * On the other hand, if
the block of stock to be valued represents a
controlling interest, either actual or effective, in a
going business, the price at which other lots change
hands may have little relation to its true value.
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