326 U.S. 480 (1960)
Commissioner v. Estate of Holmes is a pivotal case in the realm of federal estate taxation, setting significant precedents in how the valuation of a decedent's estate is approached.
Whether the estate's valuation of the decedent's stock interests in closely-held corporations for estate tax purposes must reflect the fair market value, rather than book value, and how such fair market value should be determined.
The fair market value of a decedent's property for estate tax purposes must be determined based on the price at which the property would change hands between a willing buyer and a willing seller, neither being under any compulsion to buy or sell and both having reasonable knowledge of relevant facts.
The Supreme Court held that the fair market value, rather than book value, is the correct standard for determining the valuation of a decedent's stock interests for federal estate tax purposes. The court found that this approach more accurately reflects the property’s economic reality.
This case is crucial for law students because it establishes a clear precedent on valuing estates for tax purposes, especially concerning closely-held business interests. It underscores the necessity of understanding market value principles, which are fundamental to tax law. Moreover, it offers insights into how the judiciary interprets tax regulations, balancing statutory language with practical realities.