QUESTION: 137

Fair market value is defined as the price at which the property would change hands between a willing buyer and a willing seller when:

Parallel regulation is there
Parties have sufficient knowledge base
Neither is under any compulsion to buy, or to sell, both parties having reasonable knowledge of the facts
Courts have final jurisdiction over tax matters

Answer(s): C

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It is advisable to emphasize that in the valuation of the stock of closely held corporations or the stock of corporations where market quotations are either lacking or too scarce to be recognized, all available financial data, as well as all relevant factors affecting the market value should be considered. The following factors, although not all—inclusive are fundamental and require careful analysis in each case EXCEPT:

The nature of the business and the history of the enterprise from its inception
The economic outlook in general and the condition and outlook of the specific industry in particular
The earning capacity of the company
The income-tax paying capacity of the company

Answer(s): D

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QUESTION: 139

“In computing the book value per share of stock, assets of the investment type should be revalued on the basis of their market price and the book value adjusted accordingly.” This statement explains:

Weight to be accorded various factors
Revenue ruling
Average factors
restrictive agreements

Answer(s): B

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QUESTION: 140

Which of the following is NOT out of the characteristics that must be present in a transaction while valuing recapitalizations and senior equity interests under Section 2701?

The retained security must be a class senior to the transferred junior security
The subject securities (both the retained senior preferred and transferred junior securities) must be non-publicly traded
The transaction must result in a transfer (directly or indirectly) between members of the family
The transfer is a proportionate transfer of all senior and junior equity interests and, as mentioned the transferor must retain a senior equity interest.

Answer(s): D

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QUESTION: 137

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QUESTION: 140