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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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