Estate of Cyril I. Magnin, Deceased, Donald Isaac Magnin, Executor - Page 17




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          of Cyril’s shares, Cyril retained a life estate within the                  
          meaning of section 2036(a).  Since the 1971 transfers were in               
          fulfillment of the 1951 Agreement, we must look to the value of             
          the consideration that Cyril transferred and received on October            
          31, 1951.  In order to find for the estate, the lifetime                    
          interests in Joseph’s shares received by Cyril must be “adequate            
          and full consideration” for the remainder interest Cyril was                
          required to transfer to his children, both interests being valued           
          as of October 31, 1951.  Estate of Magnin v. Commissioner, 184              
          F.3d at 1080; see also Estate of Wheeler v. United States, supra            
          at 767; Estate of D’Ambrosio v. Commissioner, supra at 313.                 
               A.   Valuation of Stock of JM and Specialty                            
               In determining the value of unlisted stocks, actual arm’s-             
          length sales of such stock conducted in the normal course of                
          business within a reasonable time before or after the valuation             
          date are the best indicia of market value.  See Duncan Indus.,              
          Inc. v. Commissioner, 73 T.C. 266, 276 (1979).  However, the                
          stocks of JM and Specialty were not publicly traded at the time             
          of the 1951 Agreement, and there is no evidence of sales of stock           
          of these two companies at any time near October 31, 1951.  In the           
          absence of arm’s-length sales, the value of closely held stock is           
          determined indirectly by weighing the corporation’s net worth,              
          prospective earning power, dividend-paying capacity, and other              
          relevant factors.  See Estate of Andrews v. Commissioner, 79 T.C.           






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