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Robert was a key person in the management of FIC. His
potential absence or inability were risks that had a negative
impact on the fair market value of FIC. On February 2, 1980, the
fair market value of each decedent's gratuitous transfer of 6
shares of FIC's common stock was subject to a key-person discount
of 10 percent. On August 24, 1981, the fair market value of the
24 shares of FIC's common stock transferred by each decedent in
the Recapitalization was subject to a key-person discount of 10
percent.
ULTIMATE FINDINGS OF FACT
On February 2, 1980, the fair market value of the gratuitous
transfer of 6 shares of FIC's common stock by each of Maude and
Royal to Robert was $82,859 ($13,810 per share).
On August 24, 1981, when Maude and Royal each exchanged 24
shares of FIC common stock for 3,000 shares of FIC's preferred
stock, the fair market value of the common stock transferred by
each of them was $424,552 ($17,690 per share).
OPINION
A. Fair Market Value of FIC Stock
Section 2501(a) provides for a tax on gifts by individuals.
Section 2512(a) provides that the value of a gift of property at
the date of the gift shall be considered the amount of the gift.
The principal issues we must decide in this case are the
value of the shares of common stock in FIC that decedents
gratuitously transferred to Robert on February 2, 1980, and the
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