-219-
The case of Dellinger v. Commissioner, 32 T.C. 1178, 1185
(1959), is instructive to our conclusion. There, a corporation
sold vacant lots to its shareholders at a bargain price. The
taxpayer argued that the fair market value of the lots was the
price that would be paid by an “investor”, and that an investor
would not have paid more than one-half of the price at which the
lots were expected to eventually sell. The Court rejected these
arguments. The Court stated:
Petitioner has not directed our attention to any case
where fair market value was predicated on or limited to
the amount that a hypothetical investor would pay for
the property, rather than the broader group referred to
in the accepted definition as a “willing buyer.” Fair
market value does not mean, of course, that the whole
world must be a potential buyer of the property
offered, but only that there are sufficient available
persons able to buy to assure a fair and reasonable
price in the light of the circumstances affecting
value. In considering the term “fair market value” as
used in section 301, supra, we cannot restrict the
market to dealers, investors, or any other limited
groups. * * * [Id.]
X. FNBC Implemented Its Mark-to-Market Method Inconsistently
With Section 475
A. Overview
FNBC primarily used its mark-to-market method to compute the
amounts that it reported as the fair market value of its swaps
for purposes of section 475. O’Brien testified that a valuation
method is not actually a mark-to-market method if the valuation
method does not arrive at fair market value. She concluded that
FNBC’s mark-to-market method did not arrive at fair market value.
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