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where it could be established that a liquidation was planned, the
General Utilities doctrine still made it possible to avoid
corporate level taxes, causing any projected tax liability from
built-in capital gains to be purely speculative and not
warranting consideration in determining fair market value. See,
e.g., Estate of Piper v. Commissioner, supra at 1087; Gallun v.
Commissioner, T.C. Memo. 1974-284.
Recently, in Estate of Davis v. Commissioner, 110 T.C. 530
(1998), we held that in determining the fair market value of
stock in a closely held corporation after the repeal of the
General Utilities doctrine, consideration of the effect of built-
in capital gains is not precluded as a matter of law and is
appropriate in some circumstances. In Estate of Davis, we were
convinced on the record that even though no liquidation or asset
sale was planned, a hypothetical willing buyer and seller would
not have disregarded the existence of built-in capital gains in
agreeing on a purchase price. In that case, both the taxpayer’s
and the Commissioner’s experts had recommended taking into
account built-in capital gains in determining fair market value.
Even before the repeal of the General Utilities doctrine, courts
had on occasion considered built-in capital gains. See, e.g.,
Obermer v. United States, 238 F. Supp. 29, 34-36 (D. Haw. 1964)
(finding expert testimony showed built-in capital gains tax would
necessarily adversely affect value of stock at issue to willing
buyer); Clark v. United States, 36 AFTR 2d 75-6417, 75-1 USTC
par. 13,076 (E.D. N.C. 1975) (well-informed willing buyer of
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