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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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