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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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