Opinion ID: 470076
Heading Depth: 1
Heading Rank: 4

Heading: the fair market value of the beavers

Text: 20 Having determined that the taxpayers' basis in their beavers should be limited to fair market value, we must determine the fair market value of the beavers. The record indicates that at the time the taxpayers entered into their contracts, Dennis Crum, Paul Sharp, and others were purchasing beavers for $16 to $250 each. The Tax Court relied on these purchases and the record as a whole to determine that the beavers purchased by the taxpayers were worth $200 per proven beaver, $137 per nonproven beaver, and $29 per yearling. We affirm these findings. They are not clearly erroneous. 21 The taxpayers argue that the Tax Court erred in its determination. They claim that the Tax Court should not have ignored the testimony of their experts as to fair market value. Each of the taxpayers' experts arrived at his estimate of fair market value without taking into account the contemporaneous sales of beavers at prices substantially less than those paid by the taxpayers. The Tax Court found that the experts estimates were unreliable for this and a variety of other reasons. It found that the contemporaneous sales were the best evidence of value in this case. Those findings are not clearly erroneous. Contemporaneous sales are highly probative of value. See Estate of Franklin v. Commissioner, 544 F.2d 1045, 1048 n. 4 (9th Cir.1976); Narver v. Commissioner, 75 T.C. 53, 96-97 (1980), aff'd, 670 F.2d 855 (9th Cir.1982) (per curiam). 22 The taxpayers argue that the contemporaneous sales are not relevant to the value of the beavers they purchased because they were all distress sales. The Tax Court found that the majority of the contemporaneous sales were not distress sales but were arm's length transactions. This finding is not clearly erroneous. The record contains many examples of sales at low prices by ranchers who had no reason to sell their animals for less than they were worth. 23 Limiting the taxpayers' basis to the fair market value of the beavers results in some of the taxpayers having paid principal amounts in cash for which they will receive no tax benefits. The Tax Court found that this result reflects the economic realities of these transactions. It found that while the taxpayers purchased beavers, they also purchased tax benefits. It therefore allocated the amounts paid by the taxpayers in excess of fair market value to the purchase of these tax benefits. We cannot say that this conclusion is clearly erroneous. These investments were promoted in part for the tax benefits they would produce. It is reasonable to conclude that a part of the purchase price for the investment was paid for the tax benefits. See Houchins v. Commissioner, 79 T.C. 570, 604-05 (1982) (part of price paid for cattle held to be paid in exchange for tax benefits).