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effect--including the * * * [section] 1341 benefit--that would
flow from a judgment against the hypothetical estate.” Estate of
Algerine Smith v. Commissioner, 198 F.3d at 528.
The estate’s reliance on this case is misplaced because in
Estate of Algerine Smith the tax benefit from the section 1341
deduction was “inextricably intertwined” with the payment of the
claim against the estate. Id. Thus, the willing buyer-willing
seller test would offset the amount of the benefit against the
value of the claim. However, in this case, there is no
contingent tax liability or tax benefit to take into account when
determining the value a willing buyer would pay for the assets in
the IRAs. Therefore, this example of accounting for tax
consequences in valuing assets in an estate is distinguishable
from the present valuation issue. A hypothetical buyer would not
consider the income tax liability of the beneficiary of the IRAs
because it is the beneficiary rather than the buyer who would pay
that tax. Estate of Smith v. United States, 391 F.3d at 626
(discussed infra).
2. Lack of Marketability Discount Cases
a. Closely Held Corporate Stock
The estate’s attempt to introduce a lack of marketability
discount reveals the most fundamental flaw in its argument. In
Estate of Davis v. Commissioner, 110 T.C. 530 (1998), the
discount for the capital gains tax liability was part of a
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