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book value of $4,602,732 for stockholders’ equity, or
approximately $35.41 per share, on its balance sheet. Each
transferred block of stock therefore commanded $242,559 of the
total stockholders’ equity documented on the Company’s books.1
After retaining the accounting firm of Grant Thornton,
petitioners each filed a Form 709, United States Gift (and
Generation-Skipping Transfer) Tax Return, reporting the values of
the gifts as determined by the accounting firm. Petitioners
reported each transferred block of stock at a fair market value
of $145,357.
OPINION
Congress has imposed a tax on the transfer of property by
gift. See sec. 2501(a)(1). The amount of the gift subject to
taxation is equal to the fair market value of the property on the
date of the gift. See sec. 2512(a); sec. 25.2512-1, Gift Tax
Regs. The U.S. Treasury regulations define fair market value as
“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. 25.2512-1, Gift Tax Regs.; see also United States
v. Cartwright, 411 U.S. 546, 551 (1973); Estate of Andrews v.
Commissioner, 79 T.C. 938, 940 (1982).
Because prices for shares of stock in a closely held
corporation are generally not available in the marketplace, we
1 $35.41 per share x 6,850 shares.
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