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Sec. 1.170A-1(c)(1), Income Tax Regs. Fair market value is the
price at which the property would change hands between a willing
buyer and a willing seller, neither being under any compulsion to
buy or sell and both having reasonable knowledge of the relevant
facts. Sec. 1.170A-1(c)(2), Income Tax Regs. The fair market
value of a share of stock or a security is not necessarily equal
to its market quotation. See sec. 1.170A-13(c)(7)(xi)(D), Income
Tax Regs. Nevertheless, we assume that Congress believed that
the existence of readily available market quotations would
substantially assist in, if not determine, fair market valuation
(and discourage overvaluation). We do not agree with petitioners
that the market quotations requirement was met because Bancorp
shares were occasionally traded by Gill & Associates, who could
provide a suggested share price based on the net asset value of
the bank. Such share price did not necessarily reflect a price
that any willing buyer or seller had accepted or would accept.
Gill & Associates charged a flat fee of 25 cents for each share
traded, and acted as a placement agent as an accommodation to the
bank, to encourage its business relationship with the bank. We
do not accept Gill & Associates’ procedures for quoting prices as
a reliable proxy for fair market valuation. The intendment of
the market quotations requirement would not be served by
accepting procedures such as those followed by Gill & Associates
with respect to Bancorp shares as satisfying the requirement.
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