Estate of Lewis A. Bailey, Deceased, Frances Jeanette Foster, Executrix - Page 24

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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           

          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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