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appropriate in this case and that the tax liability for the
capital gain should be calculated on the basis of CCC’s
established history of securities turnover. We agree with
respondent. However, before we delve into the parties’ arguments
and their experts’ opinions, it is helpful to review the legal
history of the effect of built-in capital gain tax liability in
the valuation of corporations.
Before 1986, this Court recognized that gain on appreciated
corporate assets could be avoided at the corporate level under
the principles of the General Utilities doctrine.7 That doctrine
was based on the holding in Gen. Utils. & Operating Co. v.
Helvering, 296 U.S. 200 (1935), that there would be no
recognition by the distributing corporation of inherent gain on
appreciated corporate property that was distributed to
shareholders. Accordingly, a corporation could distribute its
appreciated property to shareholders or liquidate without paying
capital gain tax at the corporate level.
On the basis of that understanding and before 1986, this
Court consistently rejected taxpayers’ attempts to discount the
value of a corporation on the basis of any inherent capital gain
tax liability on appreciated corporate property. See, e.g.,
Estate of Piper v. Commissioner, 72 T.C. 1062, 1087 (1979);
7 The General Utilities doctrine, as codified in former
secs. 336 and 337, was repealed by the Tax Reform Act of 1986,
Publ. L. 99-514, sec. 631(a), 100 Stat. 2269.
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