- 44 -
individual characteristics of the hypothetical buyer and seller
are not necessarily the same as the individual characteristics of
the actual buyer or actual seller. See Estate of Simplot v.
Commissioner, supra at 152. However, “the hypothetical sale
should not be constructed in a vacuum isolated from the actual
facts that affect the value of the stock”. Estate of Andrews v.
Commissioner, supra at 956.
In valuing the interests transferred and received by Cyril,
the estate assumes that the hypothetical buyer is a person in the
same position as Cyril. The estate then applies a control
premium to Joseph’s minority block of shares because they will
allow the hypothetical buyer in the same position as Cyril to
obtain majority voting control of JM. This is not the proper
application of the willing buyer and willing seller standard as
set forth in the estate and gift tax regulatory provisions and as
interpreted by case law because the willing buyer cannot be the
actual buyer, he must be a hypothetical person. See Propstra v.
United States, supra at 1251-1252; Estate of Bright v. United
States, supra at 1005-1006; Furman v. Commissioner, T.C. Memo.
1998-157. The willing buyer and willing seller standard renders
irrelevant the actual buyer and actual seller; however, the other
stockholders are not irrelevant under the standard. See Estate
of Bright v. United States, supra at 1007.
The estate relies on Estate of Winkler v. Commissioner, T.C.
Page: Previous 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 53 NextLast modified: May 25, 2011