47 T.C. 467">*467 A deficiency has been determined by the Commissioner in the estate tax of the Estate of Hattie L. McNary in the amount of $ 1,798.45.

The issues to be decided are (1) whether respondent has erred in valuing 1967 U.S. Tax Ct. LEXIS 149">*151 securities in the estate which were traded on the over-the-counter market on the basis of the average of the means of the quoted bona fide bid and ask prices and (2) whether the value of such stocks selling ex-dividend on the valuation date was properly increased by the amount of the respective dividends pertaining thereto. Other issues which have been settled by the parties will be given effect under Rule 50.

FINDINGS OF FACT

All stipulated facts are found as stipulated.

Petitioner is Stacey L. McNary, executor of the Estate of Hattie L. McNary, deceased, under letters testamentary granted on June 1, 1962, by the Probate Court of Lucas County, Ohio. Decedent died testate on Sunday, May 27, 1962, at which time she was a resident of Toledo, Ohio. Petitioner filed a Federal estate tax return for the estate on October 16, 1962, with the district director of internal revenue, Cleveland, Ohio.

The value of all property included in the gross estate on the estate tax return was determined as of the aforesaid date of death, May 27, 1962.

The estate tax return included in the gross estate (in Schedules B and G) the following securities which in 1962 were traded as follows: 47 T.C. 467">*468

These listed securities had the following total fair market values as of May 27, 1962, without consideration of any dividends:

Sunday, May 27, 1962, was a nontrading day for the securities market. The nearest trading days for that market were Friday and Monday, May 25 and 28, 1962, respectively.

The quoted per-share bid and asked prices of the over-the-counter securities on May 25 and 28, 1962, as published in the Wall Street Journal on those 2 days, are as follows:

Respondent determined the value as of May 27, 1967 U.S. Tax Ct. LEXIS 149">*153 1962, of each of the over-the-counter securities in accordance with the provisions of section 20.2031-2(c), Estate Tax Regs., 1954 Code, namely, by the average of the means between the quoted bid and asked prices of the respective securities on May 25 and May 28, 1962.

The published securities quotations do not represent actual transactions, but ranges within which buy and sell transactions may occur.

A securities exchange market is an auction market; whereas the securities over-the-counter market is a negotiated market, wherein professional buyers and sellers seek each other out and negotiate prices 47 T.C. 467">*469 on the most favorable basis that can be achieved. In the latter market, a buyer and seller are free to negotiate or to bargain with one or several dealers who have the stock for sale regarding the price at which the transaction will occur.

Dividends on three of the aforestated stocks were declared and were payable as follows:

The above three1967 U.S. Tax Ct. LEXIS 149">*154 stocks were selling ex-dividend prior to May 25, 1962. The total fair market value of the General Motors stock and the respective bid and asked prices of the Valley Mould & Iron and Bank of America stocks set forth above are ex-dividend values and prices.

ULTIMATE FINDINGS OF FACT

The fair market value per share or bond (ex-dividend, where applicable) of each of the over-the-counter securities included in the gross estate was the average of the means between the quoted bid and asked prices of the respective security on May 25 and 28, 1962, as above set forth.

The values of the three stocks involved which were selling ex-dividend on May 27, 1962, must be adjusted to reflect the additional value of the respective dividends in determining their fair market values for estate tax purposes.

OPINION

Without the citation of any authority petitioner takes the position herein that the only proper criterion for determining the fair market value of the securities included in the assets of this estate, the values of which were, on the valuation date, quoted on the over-the-counter market, is the quoted bid price, and that respondent's computation using the average of the means of bid and ask 1967 U.S. Tax Ct. LEXIS 149">*155 prices as provided in section 20.2031-2(c), Estate Tax Regs., ¹1967 U.S. Tax Ct. LEXIS 149">*156 is in error and results in a 47 T.C. 467">*470 higher valuation than is required by section 2031(a), I.R.C. 1954. ² On brief, petitioner relies entirely upon the testimony of the son of its counsel to the effect that on the valuation date had petitioner sold the securities in question, being the seller, only the bid price would have been realized. We think petitioner's premise is faulty.

The valuation required by section 2031(a) of the Code is fair market value. Estate of Caroline McCulloch Spencer, 5 T.C. 904">5 T.C. 904. Fair market value is that price at which property changes hands between a willing seller and a willing buyer, both being properly informed and neither being under compulsion to either buy or sell. Such evidence as appears here indicates, we think truthfully, that in over-the-counter trade of securities such prices are reached by negotiation between buyer and seller with the logical result that sales (which are usually the best measure of fair market value) occur within the range of the bid and ask prices. Respondent's regulation, quoted in the margin, is of long standing and represents a measure of stability in this area of litigation and we are1967 U.S. Tax Ct. LEXIS 149">*157 directed to no authority and are given no convincing reason here to overrule the regulation. We hold that respondent's method of valuation on the facts shown by this record is correct.

Also, without the citation of any authority, petitioner takes the position that, because the estate must include in taxable income the dividends declared before the death of decedent and paid subsequent thereto, it follows that the value of the securities pertaining to such dividends should not be increased in accordance therewith. Petitioner argues that this is so because otherwise double taxation results.

Section 2031(a) lays a tax upon the value of all property transferred or to be transferred to the beneficiaries of an estate including the right to receive dividends to be paid the estate subsequent to the death of a decedent. Estate of George McNaught Lockie, 21 T.C. 64">21 T.C. 64. That Congress was aware of the fact that inclusion of such a right in the taxable assets of an estate for estate tax purposes and also to include the dividends themselves in the taxable income of the estate would result in the taxing, in effect, of the same property for two different purposes is1967 U.S. Tax Ct. LEXIS 149">*158 evident from its enactment of section 691(c)³ of the 1954 Code. That section provides for a deduction from gross income in 47 T.C. 467">*471 such a situation equal to the amount of the estate tax which is attributable to the increase in value of securities brought about by the dividend being declared prior to decedent's death but payable subsequent thereto. Respondent's regulation, section 20.2033-1(b), requires the inclusion in the gross estate of the amount of such dividends even though unpaid at the valuation date or, in the alternative, section 20.2031-2(i) requires an increase in the ex-dividend value of securities to reflect the right in the estate to receive such dividends. We see no reason and our attention is not called to any which would convince us that respondent's cited regulations are invalid, and we therefore, sustain respondent's position on this issue.

1967 U.S. Tax Ct. LEXIS 149">*159 Decision will be entered under Rule 50.