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discounted for built-in capital gains tax with respect to the
underlying assets. This Court, however, agreed with the donor’s
estate that the value of the stock must be discounted to allow
for the tax liability that would be paid upon selling the assets
in the corporation. This Court concluded that “even though no
liquidation of * * * [the corporation] or sale of its assets was
planned or contemplated on the valuation date, a hypothetical
willing seller and a hypothetical willing buyer would not have
agreed on that date on a price for each of the blocks of stock in
question that took no account of [the corporation’s] built-in
capital gains tax.” Id. at 550. Similarly, in Eisenberg v.
Commissioner, 155 F.3d 50 (2d Cir. 1998), revg. T.C. Memo. 1997-
483, the Court of Appeals for the Second Circuit held that the
donor may consider the potential future capital gains tax
liability resulting from corporate liquidation when valuing a
gift of corporate stock. In applying the willing buyer-willing
seller test, the court reasoned that “‘the potential transaction
is to be analyzed from the viewpoint of a hypothetical buyer
whose only goal is to maximize his advantage. * * * [C]ourts may
not permit the positing of transactions which are unlikely and
plainly contrary to the economic interest of a hypothetical
buyer.’.” Id. at 57 (quoting Estate of Curry v. United States,
706 F.2d at 1428-1429).
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