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The taxpayer argued that the determination of value for
purposes of the estate tax did not conclusively establish fair
market value and that her gain or loss upon the sale of the stock
should have been computed upon the basis of the stock’s actual
fair market value on the date of her mother’s death, if it was
established that that value was different from the value at which
the stock was included for estate tax purposes. Respondent
contended that the value at which the stock was appraised for
Federal estate tax purposes, and upon which value that tax was
paid, established the fair market value of the stock received by
the taxpayer from her mother’s estate. The Board of Tax Appeals
agreed with the taxpayer and provided the following reasoning for
its decision:
Whether the petitioner has established that value
is a question of fact. No evidence supporting the
application of the blockage rule appears in the record.
However, the facts stipulated disclose that the volume
of trading in this particular stock at or about the
date of death of petitioner’s mother was not only very
large, compared with the block of stock to be valued,
but that the price trend was upward. In our judgment,
this record thus overcomes the presumption of
correctness attaching to respondent’s determination of
basis. We find that on November 9, 1928, the fair
market value of the 2,525 shares of stock sold by
petitioner in 1935 was $86.70 per share. [Id.;
citation omitted and emphasis added.]
Contrary to petitioners’ understanding of Augustus, the
Board of Tax Appeals concluded that the taxpayer could use the
undiscounted fair market value of the F.W. Woolworth Co. stock as
of November 9, 1928, as her basis for income tax purposes because
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