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Number of Value per Total Value
Company Shares Share
Exxon Corp. 10,000 $102.88 $1,028,750
American
Veterinary Corp. 1,000 10.88 10,875
Olde Money
Market Fund 7,978 1.00 7,978
The FLP had substantial unrealized capital gains due to the
increase in the value of the Exxon stock. On April 17, 1997,
Mrs. Dailey’s attorney filed, and respondent received, a gift tax
return reflecting the gifts of the 45- and 15-percent limited
partnership interests to Mr. Dailey and his wife. On the gift
tax return, Mrs. Dailey reported a 40-percent discount from the
net asset value (NAV) of the partnership’s assets.
OPINION
The FLP was validly formed pursuant to Texas law, and we do
not disregard it for tax purposes. See Estate of Strangi v.
Commissioner, 115 T.C. 478, 487 (2000); Knight v. Commissioner,
115 T.C. 506, 513-515 (2000).
The parties agree that, pursuant to section 7491(a),
petitioners have introduced credible evidence, and respondent
shall have the burden of proof, relating to the valuation issue.
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. Sec. 20.2031-1(b),
Estate Tax Regs.; sec. 25.2512-1, Gift Tax Regs. On brief, the
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