Leo J. Polack - Page 8




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          worth 90 cents each.  At trial, however, respondent conceded that           
          the shares at issue were worth 88 cents each.5                              
                                       OPINION                                        
               The only issue for decision is the value of the 1,040,000              
          gifted shares of stock in ZSI on December 31, 1992.  In deciding            
          the value of gifted shares of stock, we look to “the price at               
          which such 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.”  Sec. 25.2512-1, Gift Tax Regs.6                                    
               Although we consider all the relevant facts and                        
          circumstances in valuing gifted property, the value of a closely            
          held business is best ascertained by relying on actual arm’s-               
          length sales or transfers, if any, of the stock within a                    
          reasonable period of the valuation date.  Estate of Fitts v.                
          Commissioner, 237 F.2d 729, 731 (8th Cir. 1956), affg. T.C. Memo.           
          1955-269;  Estate of Andrews v. Commissioner, 79 T.C. 938, 940              
          (1982).  The record contains no evidence of a sale or transfer of           




               5This concession was mathematical in nature and not in                 
          substance different from Mr. Cashion’s reported conclusion that             
          the shares were worth 90 cents each.                                        
               6Unless otherwise noted, all section references are to the             
          Internal Revenue Code in effect for the taxable year at issue,              
          and all Rule references are to the Tax Court Rules of Practice              
          and Procedure.                                                              





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