Charles C. Dockery, Donor - Page 14

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          A.   Background                                                             
               Section 2501 imposes a tax on gifts of property by an                  
          individual.  Gift tax is based on the fair market value of the              
          property on the date of the gift.  Sec. 2512(a).  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 to sell and both having reasonable                 
          knowledge of the relevant facts.  United States v. Cartwright,              
          411 U.S. 546, 551 (1973); sec. 25.2512-1, Gift Tax Regs.                    
               The fair market value of stock is a question of fact.  Hamm            
          v. Commissioner, 325 F.2d 934, 938 (8th Cir. 1963), affg. T.C.              
          Memo. 1961-347.  If selling prices for stock in a closely held              
          corporation which is not listed on any exchange are not                     
          available, then we decide its fair market value by considering              
          factors such as the company's net worth, earning power, dividend-           
          paying capacity, management, goodwill, position in the industry,            
          the economic outlook in its industry, and the values of publicly            
          traded stock of comparable corporations.  See sec. 20.2031-2(f),            
          Estate Tax Regs.                                                            
               Petitioner has the burden of proving that respondent's                 
          determinations in the notice of deficiency are erroneous.7  Rule            
          142(a); Welch v. Helvering, 290 U.S. 111, 115 (1933).                       


               7 We need not decide whether to shift the burden of proof to           
          respondent or modify it, as petitioner contends because we would            
          reach the same result regardless of which party bears the burden            
          of proof.                                                                   



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