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The parties dispute the value of: (1) Two promissory notes,
(2) decedent’s 27.5-percent interest in Clubside, and (3)
decedent’s stock interest in WLI.
1. Value of Clubside Promissory Notes
The parties dispute the value of two promissory notes of
Clubside, one payable to decedent and the other payable to
Hoffman Associates (of which decedent owned 100 percent of the
outstanding stock).
For estate tax purposes, “the fair market value of notes,
secured or unsecured, is presumed to be the amount of unpaid
principal, plus interest accrued to the date of death, unless the
executor establishes that the value is lower or that the notes
are worthless.” Sec. 20.2031-4, Estate Tax Regs. The burden of
proof is on the taxpayer to submit satisfactory evidence that the
note is worth less than the face value plus accrued interest
(e.g., because of the date of maturity, interest rate, or other
cause). See Estate of Pittard v. Commissioner, 69 T.C. 391, 399
(1977); Estate of Berkman v. Commissioner, T.C. Memo. 1979-46;
sec. 20.2031-4, Estate Tax Regs. In the instant case, both
parties departed from the presumed fair market value and
discounted the promissory notes from the date of maturity to the
valuation date.
Respondent relies on the report and testimony of his expert
appraiser, Mark Mitchell (Mr. Mitchell), to determine the value
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