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gross income does not include any contribution to the capital of
the taxpayer." Section 118(b), however, excludes a "contribution
in aid of construction" from the definition of a "contribution to
the capital of the taxpayer".
A taxpayer must include in gross income the value of
property received. See sec. 1.61-1(a), Income Tax Regs. The
determination of fair market value is a question of fact to be
resolved from a consideration of all relevant evidence in the
record and the appropriate inferences to be drawn therefrom. See
Estate of Jung v. Commissioner, 101 T.C. 412, 423-424 (1993).
"Fair market value" has been defined by this Court to mean 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 a reasonable knowledge of the
relevant facts. See Estate of Newhouse v. Commissioner, 94 T.C.
193, 217 (1990).
Methods of Valuation
There are generally three kinds of valuation methods used to
determine fair market value: (1) The comparable sales method, (2)
the capitalization of income method, and (3) the cost method.
See Marine v. Commissioner, 92 T.C. 958, 983 (1989), affd.
without published opinion 921 F.2d 280 (9th Cir. 1991).
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