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company that acquired Johnco would be likely to continue
harvesting timber, a sale of the assets might never take place,
and taxation of the built-in capital gains could be postponed
indefinitely.
Even if Johnco were to be liquidated, Mr. Burns thought it
would be possible to avoid recognition of the built-in capital
gains using a number of "tax strategies", such as: (1) Accepting
debt obligations payable over future years and electing the
installment method; (2) exchanging the property in a like-kind
exchange; and (3) electing S corporation treatment and holding
the assets for at least 10 years.
d. Selling Costs
Mr. Burns also rejected applying a discount to reflect
future selling costs. He noted that selling costs are part of
any transaction and would be reflected in the selling prices of
comparable properties used to value the Timber Property.
Moreover, Mr. Burns thought it inappropriate to discount the fair
market value of decedent's Johnco stock for selling costs that
were only hypothetical, insofar as they would not be incurred
unless and until the new purchaser sold the Timber Property.
B. Fair Market Value of Johnco
1. Built-In Capital Gains
On several occasions, we have held that, in valuing stock in
a closely held corporation using the net asset value method, a
discount to reflect potential capital gains tax liabilities at
the corporate level was unwarranted where there was no evidence
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