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GmbH was $2.6 million on the valuation date, relying on the
expert report of Lahmann. The reported values in petitioner’s
return are admissions by petitioner. A lower value cannot be
substituted at this point without cogent proof that the reported
values were erroneous. See Estate of Hall v. Commissioner, supra
at 337-338. For the reasons indicated above, we are not
persuaded by Lahmann’s use of hindsight, nor are we persuaded by
respondent that the fair market value should be increased.
Accordingly, the fair market value of Schlegel GmbH on the
valuation date, exclusive of the silent partnership interest, was
$3.777 million.
Adjusted Basis of Schlegel GmbH
The parties also disagree as to the adjusted basis of
Schlegel GmbH. Respondent maintains that the adjusted basis is
$4,047,993, and petitioner argues that the adjusted basis should
also include interest income of $675,227 that Schlegel GmbH
reported on its 1988 tax return pursuant to section 951.
Section 961 provides that the basis of a U.S. shareholder’s
stock in a controlled foreign corporation is increased by the
amount included in the shareholder’s gross income under section
951. Section 961(b), however, provides that the basis of such
stock shall be reduced by the amount actually received and
excluded from gross income of the U.S. shareholder under section
959. Schlegel Corporation included $675,227 of interest income
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