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OPINION
This case involves the valuation for gift tax purposes of 10
shares of the outstanding stock of a closely held C corporation.
Under section 2501(a)(1), a tax is imposed for each calendar year
on the transfer of property by gift during such calendar year by
any individual. If the gift is made in property, the value of
the property at the date of the gift shall be considered the
amount of the gift. Sec. 2512(a). The value of property for
gift tax purposes 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 to sell, and both having
reasonable knowledge of relevant facts.11 Sec. 25.2512-1, Gift
Tax Regs.
Generally, in valuing shares of a closely held corporation,
actual arm’s-length sales of stock in the normal course of
business within a reasonable time before or after the valuation
date are the best indicators of fair market value. Estate of
11The willing buyer and willing seller are hypothetical
persons, rather than specific individuals or entities, and their
characteristics are not necessarily the same as those of the
donor and the donee. McCord v. Commissioner, 120 T.C. 358, 373
(2003). The hypothetical willing buyer and seller are presumed
to be dedicated to achieving the maximum economic advantage.
Estate of Curry v. United States, 706 F.2d 1424, 1429 (7th Cir.
1983). This advantage must be achieved in the context of market
conditions, the constraints of the economy, and the financial and
business experience of the corporation existing at the valuation
date. Estate of Newhouse v. Commissioner, 94 T.C. 193, 218
(1990).
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