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Accordingly, we hold that for purposes of valuing decedent’s
50 shares of C&L Bailey stock, the value of the California motel
is appropriately estimated at $1,388,000. Taking into
consideration that respondent has not determined that the estate
erred by excluding decedent’s one-half ownership interest in
parcel 2 from the gross estate as reported on the estate tax
return, and seeking to avoid possible double counting, we hold
further that decedent’s gross estate includes no separate value
attributable to decedent’s individual ownership interest in
parcel 2.
The $145,000 Shareholder Liability
C&L Bailey’s December 31, 1995, balance sheet reported a
$145,000 liability for “Loans from shareholders”. In determining
9(...continued)
reduce the value of his total assets or should be viewed in the
aggregate to reflect the economic reality that decedent would be
unlikely to act adversely to his own economic interests. In this
latter regard, however, we observe that a hypothetical seller in
decedent’s shoes, rather than sell the 50 shares of C&L Bailey
stock at a bargain-basement price on account of the divided
ownership of parcel 2, might reasonably be expected to relinquish
the individual ownership interest in parcel 2 to clear the title
and thereby preserve the stock’s value. The evidence strongly
suggests that this is precisely what decedent’s heirs did:
shortly after the title defect was discovered in the course of
C&L Bailey’s attempted sale of the California motel to a third
party, Frances, Roger, and Harold each deeded over to C&L Bailey,
apparently without consideration, their one-third interests in
decedent’s one-half interest in parcel 2. Although we do not
predicate our holding on these postdeath events, we believe they
are usefully considered for the limited purpose of illuminating
expectations that a hypothetical willing buyer and seller might
reasonably have entertained as of the date of decedent’s death.
See Estate of Gilford v. Commissioner, 88 T.C. 38, 52-53 (1987);
Estate of Jephson v. Commissioner, 81 T.C. 999, 1002 (1983).
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