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We find that the net fair market value of Exxon’s claim at the
time of decedent’s death was not more than $681,840.
Conclusion
Valuing a lawsuit can be a difficult task. As the Court of
Appeals noted:
The actual value of Exxon’s claim prior to either
settlement or entry of a judgment is inherently
imprecise, yet “even a disputed claim may have a value,
to which lawyers who settle cases every day may well
testify, fully as measurable as the possible future
amounts that may eventually accrue on an uncontested
claim.” [Estate of Smith v. Commissioner, 198 F.3d at
525 (quoting Gowetz v. Commissioner, 320 F.2d 874, 876
(1st Cir. 1963)).]
See also Estate of Davis v. Commissioner, T.C. Memo. 1993-155 (a
lawsuit is not the type of asset, either tangible or intangible,
which readily fits within the categories of things regularly
traded in commerce). The Court of Appeals also noted:
Obviously, the position of a defendant in a
pending lawsuit is not a thing commonly bought or sold.
There is certainly no ready market in which the Estate
could pay another to assume its place as the subject of
Exxon’s claim. * * * [Estate of Smith v. Commissioner,
supra at 529 n.61.]
The evidence indicates that respondent and Mr. Glasser
studied the instructions set forth by the Court of Appeals and
attempted to adhere to those instructions in reaching their
valuation determinations. In reaching our decision, we have
evaluated the evidence presented in a manner we believe is
consistent with the instructions provided by the Court of Appeals
for the Fifth Circuit. Respondent presented credible evidence
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