William Norwalk, Transferee, et al. - Page 24

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          $102,000.  Respondent's experts arrived at their opinion by                 
          estimating the replacement cost of items listed on an asset                 
          ledger and then subtracting an amount for accumulated                       
          depreciation based upon an estimate using each item's age and               
          useful life.  The amount of depreciation was calculated using the           
          experts' own "in house developed software."10  However, none of             
          the tangible assets were inspected by respondent's experts, nor             
          did they have any actual knowledge of the nature or condition of            
          the assets distributed.                                                     
               Petitioners, on the other hand, argue that the tangible                
          assets of the corporation had a fair market value equal to, or              
          less than, the corporation's adjusted basis in the assets on the            
          date of distribution.  The tangible assets at issue were                    
          contributed to the partnership at an agreed value equal to the              
          corporation's basis as reported on its 1992 Federal income tax              
          return.  Petitioners rely upon the contribution value of the                
          tangible assets as evidence of the assets' fair market value.  It           
          is well established that the best evidence of fair market value             
          is the amount paid for property in an arm's-length transaction at           
          or near the relevant valuation date.  Chiu v. Commissioner, 84              
          T.C. 722, 734 (1985).  Respondent does not argue that the                   
          contribution of the tangible assets by the shareholders was other           
          than at arm's length, and the opinions of respondent's experts do           


               10Additionally, the market approach was used as a check for            
          some items, such as computer equipment.                                     



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