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may be the best evidence of fair market value. See Ward v.
Commissioner, 87 T.C. 78, 101 (1986); Estate of Andrews v.
Commissioner, 79 T.C. 938, 940 (1982); Duncan Indus., Inc. v.
Commissioner, 73 T.C. 266, 276 (1979).
Demco stock was not listed on an exchange at the time of the
gifts, and there was no other public market for Demco stock. The
parties have identified six transactions in Demco stock occurring
prior to the gifts. However, three of these transactions
occurred more than 5 years before the gifts. The three others
(the redemptions from Demco’s officers) were consummated almost 2
years before the gifts; Demco’s net income declined sharply
during those years. Moreover, the officers whose stock was
redeemed would have been entitled, under the terms of the buy-
sell agreement, to receive the book value of the stock upon their
deaths or earlier terminations of employment. The redemption
price actually paid was only slightly higher than book value.
For all these reasons, the redemptions and other prior
transactions in Demco stock are not the best evidence of, and
should not by themselves determine, the fair market value of
Demco stock on the date of the gifts.
In cases such as those at hand, where there is no market for
the stock to be valued and there are no dispositive arm’s-length
transactions, fair market value is to be determined by taking all
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