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United States v. Cartwright, 411 U.S. 546, 551 (1973); Morris v.
Commissioner, 70 T.C. 959, 988 (1978). The determination of fair
market value is a question of fact. Hamm v. Commissioner, 325
F.2d 934, 938 (8th Cir. 1963), affg. T.C. Memo. 1961-347; Estate
of Newhouse v. Commissioner, 94 T.C. 193, 217 (1990).
The parties agree that if we hold the distribution of
Clinpath stock to petitioner’s shareholders did not qualify as a
section 355 transaction, as we have, then the amount of corporate
gain resulting from the distribution is the excess of the fair
market value of the Clinpath stock in the hands of petitioner
over petitioner’s adjusted basis in the stock. The parties do
not dispute that petitioner’s adjusted basis in the clinical
laboratory assets, and, accordingly, the Clinpath stock, was
$105,015. The parties disagree, however, as to how the fair
market value of the Clinpath stock should be measured.
Respondent contends that the fair market value of the
Clinpath stock petitioner received and distributed to its
shareholders on October 30, 1993, should be measured by the price
paid by NHL for the Clinpath stock. NHL purchased the Clinpath
stock for $5,530,000 on the same day the stock was distributed to
petitioner’s shareholders. Petitioner argues in effect that the
purchase price paid by NHL for the Clinpath stock was excessive
and urges us to conclude instead that the fair market value of
the Clinpath stock should be measured by the fair market value of
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