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had not been shown that it was likely the corporate property
would be sold and/or that the capital gain tax would be incurred.
See, e.g., Estate of Welch v. Commissioner, supra; Eisenberg v.
Commissioner, supra; Gray v. Commissioner, supra.
Appellate courts in two of these cases reversed our
decisions that a reduction in value for built-in capital gain tax
liability was inappropriate. The Court of Appeals for the Second
Circuit reasoned that, although realization of the tax may be
deferred, a willing buyer would take some account of the built-in
capital gain tax. Eisenberg v. Commissioner, 155 F.3d at 57-58.
Likewise, the Court of Appeals for the Sixth Circuit disagreed
with our specific holding that the potential for a capital gain
tax liability was too speculative. Estate of Welch v.
Commissioner, supra. The Court of Appeals for the Sixth Circuit,
to some extent, agreed with the Court of Appeals for the Second
Circuit’s approach in Eisenberg. Neither the Court of Appeals
for the Second Circuit nor the Court of Appeals for the Sixth
Circuit prescribed the amount of reduction or a method to
calculate it.
The Commissioner has since conceded the issue of whether a
reduction for capital gain tax liability may be applied in
valuing closely held stock by acquiescing to the Court of Appeals
for the Second Circuit’s decision in Eisenberg. See 1999-1 C.B.
xix. In addition, in this case the parties agree and we hold
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