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OPINION
I. Value of Decedent's Interest in Deft
A. Valuation of Closely Held, Unlisted Stock
Property is included in a decedent's gross estate at its
fair market value as of the date of the decedent's death or, if
the executor elects, as of the alternate valuation date. See
secs. 2031(a), 2032(a); sec. 20.2031-1(b), Estate Tax Regs.
Under section 2032(a)(2), the alternate valuation date is the
date 6 months after the decedent's death.
Fair market value is the price at which property would
change hands between a willing buyer and a willing seller,
neither being under any compulsion to buy or sell and both having
reasonable knowledge of relevant facts. See United States v.
Cartwright, 411 U.S. 546, 551 (1973); Estate of Gilford v.
Commissioner, 88 T.C. 38, 48 (1987); sec. 20.2031-1(b), Estate
Tax Regs. The willing buyer and the willing seller are
hypothetical persons. See, e.g., Estate of Newhouse v.
Commissioner, 94 T.C. 193, 218 (1990).
Determining the fair market value of closely held, unlisted
corporate stock is difficult because it involves property that
has no public market. The valuation of such stock is a matter of
judgment rather than of mathematics. See Hamm v. Commissioner,
325 F.2d 934, 940 (8th Cir. 1963), affg. T.C. Memo. 1961-347.
The best method for valuing closely held, unlisted stock is by
reference to actual arm's-length sales of the stock in the normal
course of business within a reasonable time before or after the
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Last modified: May 25, 2011