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decedent at death are included in the gross estate; the value of
the gross estate generally is determined as of the date of death.
See secs. 2031(a), 2033; sec. 20.2031-1(b), Estate Tax Regs.
Fair market value is the standard for determining value of
transfers of property subject to Federal estate tax. See United
States v. Cartwright, 411 U.S. 546, 550 (1973). Fair market
value is “the price at which the property would change hands
between a willing buyer and a willing seller, neither being under
any compulsion to buy or to sell and both having reasonable
knowledge of relevant facts.” Id. at 551; see sec. 20.2031-1(b),
Estate Tax Regs. The willing buyer and seller are hypothetical
persons, rather than specific individuals or entities, and their
characteristics are not necessarily the same as those of the
actual buyer or seller. See Estate of Newhouse v. Commissioner,
94 T.C. 193, 218 (1990) (citing Estate of Bright v. United
States, 658 F.2d 999, 1006 (5th Cir. 1981)). The hypothetical
willing buyer and seller are presumed to be dedicated to
achieving the maximum economic advantage. As stated in Estate of
Newhouse, 94 T.C. at 218: “This advantage must be achieved in the
context of market conditions, the constraints of the economy, and
the financial and business experience of the corporation existing
at the valuation date.”
Generally, the shares of a closely held corporation for
which there is no public market, in the absence of recent arm’s-
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