however, the year of the worthlessness is fixed by identifiable events that form the basis of reasonable grounds for abandoning any hope of recovery. United States v. S.S. White Dental Manufacturing Co., 274 U.S. 398 (1927); American Offshore, Inc. v. Commissioner, supra at 593; Crown v. Commissioner, supra at 598; Dallmeyer v. Commissioner, 14 T.C. 1282, 1292 (1950). Worthlessness is determined primarily by objective standards. American Offshore, Inc. v. Commissioner, supra at 594; Perry v. Commissioner, 22 T.C. 968, 973 (1954). The amounts due from Speck under the 1985 agreement were overdue, but the fact that accounts are overdue, standing alone, does not warrant deducting them as worthless. See Shippen v. Commissioner, 30 T.C. 716, 727 (1958), revd. and remanded on other grounds 274 F.2d 860 (5th Cir. 1960); Eastern N.J. Power Co. v. Commissioner, 37 B.T.A. 1037, 1040 (1938); Chicago Ry. Equip. Co. v. Commissioner, 4 B.T.A. 452, 459 (1926). The payments due under the 1986 agreement were not due, however, until the spring of 1987. The Raiders' collection efforts in 1986 consisted mainly of Birren's speaking with Bob Speck on several occasions about the debt's being overdue. In November 1987, Speck acknowledged that money was still owed under the 1985 and 1986 agreements and stated his intent to pay the balance before the end of 1987. The Raiders sought collection of the total amounts owed by Speck until at least December 1987.

While Birren's testimony indicated that Speck's advertisers had been slow in paying in 1986, Birren did not indicate that Speck's advertisers did not or were not going to pay. Birren also stated that DCA had not paid pursuant to its agreement with Speck. The subjective opinion of Birren alone that Speck's debt was uncollectible is insufficient to prove worthlessness. See Fox v. Commissioner, 50 T.C. 813, 822 (1968); Newman v. Commissioner, T.C. Memo. 1982-61.

On brief, petitioners argue that "The regulations do not require the filing of a suit for collection as a condition to the bad debt deduction", but petitioners ignore the remaining portion of the pertinent regulation. Section 1.166-2(b), Income Tax Regs., provides:

(b) Legal action not required. Where the surrounding circumstances indicate that a debt is worthless and uncollectible and that legal action to enforce payment would in all probability not result in the satisfaction of

execution on a judgment, a showing of these facts will be sufficient evidence of the worthlessness of the debt for purposes of the deduction under section 166.

Petitioners did not produce any evidence at trial that would indicate that, if the Raiders had instituted collection proceedings, the result would not have been the satisfaction of execution on the judgment.

The Raiders continued to do business with Speck until sometime after 1990. While the mere continuation of business with Speck is not determinative of the debt's worth, it is a factor to be considered. See, e.g., Record Wide Distribs., Inc. v. Commissioner, T.C. Memo. 1981-12, affd. 682 F.2d 204 (8th Cir. 1982).

Petitioners have failed to show any identifiable event that would have formed the basis for reasonably abandoning any hope of recovery of $400,000 of the Speck debt in 1986. Respondent's disallowance of the bad debt deductions is sustained.

To reflect the foregoing and concessions of the parties,

Decisions will be entered under Rule 155.

ESTATE OF CHARLES K. MCCLATCHY, DECEASED, WILLIAM K. COBLENTZ AND JAMES MCCLATCHY, PERSONAL REPRESENTATIVES, PETITIONER v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT

Docket No. 21876-93.

Filed April 3, 1996.

Decedent owned shares of stock that before his death were subject to certain securities law restrictions adversely affecting the value of the shares. The restrictions were not applicable to the shares in the hands of decedent's personal representatives, so that the per share value automatically increased from $12.3375 to $15.56 at decedent's death. Held: The per-share value for Federal estate tax purposes is $15.56, since that was the value at the "moment" of decedent's death. Ahmanson Found. v. United States, 674 F.2d 761 (9th Cir. 1981), applied; United States v. Land, 303 F.2d 170 (5th Cir. 1962), followed; sec. 2033, I.R.C., which mandates the inclusion in a decedent's gross estate of the value of all property to the extent of his/her interest therein at the time of death, does not require a different result; Estate of Harper v. Commissioner, 11 T.C. 717 (1948), explained.

Jeffry A. Bernstein and James P. Mitchell, for petitioner.
Kathryn K. Vetter, for respondent.

OPINION

NIMS, Judge: In this case, respondent determined $5,784,910 Federal estate tax deficiency and a $1,156,982 addition to tax under section 6662(b)(1). Unless otherwise indicated, all section references are to the Internal Revenue Code in effect at decedent's date of death, and all Rule references are to the Tax Court Rules of Practice and Procedure.

After concessions, the sole remaining issue for decision is whether certain securities law restrictions that applied to shares of stock of McClatchy Newspapers, Inc. (the company), owned by decedent during his lifetime, but which became inapplicable by reason of decedent's death, have the effect of limiting the value of the shares for purposes of establishing the Federal estate tax liability of decedent's

estate.

The parties submitted this case fully stipulated, and the facts as stipulated are so found. William K. Coblentz and James McClatchy, decedent's executors, resided in California when they filed the petition in this case. Decedent's will was probated in the Superior Court of Sacramento County, Sacramento, California. Decedent, Charles K. McClatchy, died on Sunday, April 16, 1989. At his death, he owned 2,078,865 class B shares of the company. The class B shares were reported by petitioner on Form 706, United States Estate (and Generation-Skipping Transfer) Tax Return at a $12.3375 per-share value for a total value of $25,647,996.94. Decedent was a director, chairman of the board, and chief executive officer (CEO) of the company at the time of his death. The company had two classes of common stock: class A, which was publicly traded, and class B, which was not.

The class A and class B stock had identical dividend rights and equal rights in the event of dissolution or liquidation. The class B stock had superior voting rights. Class A shareholders were entitled to one vote per share; class B shareholders were generally entitled to 10 votes per share. Each share of class B stock was convertible at any time at the option of the holder into one share of class A stock, subject

to the restrictions set out in a stockholders' agreement. At the time of his death decedent owned no class A stock.

Decedent was an affiliate of the company for Federal securities law purposes because he was CEO, a director of the company, and a class B shareholder and had beneficial ownership of class B shares as trustee and beneficiary of certain trusts holding class B stock.

The class B stock owned by decedent prior to his death was unregistered and restricted for Federal securities law purposes under rule 144 of the Securities Act of 1933 (SEC rule 144). 17 C.F.R. sec. 230.144(a)(1) (1989). The same securities law restrictions would have applied if decedent had at any time converted his class B stock to class A stock; such converted shares would also have been unregistered and restricted. As a result, the class B stock (after conversion to unregistered class A stock) could only have been sold by decedent to the public in accordance with certain volume and manner of sale restrictions under SEC rule 144, and any donee or transferee of such shares would have acquired the shares subject to such restrictions.

Decedent's personal representatives, acting in that capacity, were not collectively an affiliate for Federal securities law purposes and, therefore, were not subject to those same securities law restrictions applicable to decedent. Decedent's estate was not an affiliate for Federal securities law purposes.

The Federal securities law restrictions that affected decedent's ability to sell shares of class B stock (and shares of class A stock after a conversion) were not self-imposed or voluntarily made and did not result from an agreement or arrangement by decedent.

Petitioner and respondent have agreed that the fair value of the class B shares for estate tax purposes was $12.3375 if the securities law restrictions that affected decedent's ability to dispose of or otherwise transfer the class B shares during life are taken into consideration. Petitioner and respondent have further agreed that the fair value of the class B shares for estate tax purposes was $15.56 per share if the securities law restrictions applicable to decedent are disregarded for Federal estate tax valuation purposes.

Petitioner argues that the class B shares subject to securities law restrictions comprise the "interest" in property under

section 2033 that was transferred by decedent at death, that the value of such interest is all that is included in decedent's gross estate, and that the value of the interest transferred by decedent is determined by valuing only the restricted share interest of decedent.

Petitioner also urges that assuming, for the sake of argument, valuation under section 2031 is at issue, the proper measure of value for the interest transferred is limited to that which decedent could have realized during his lifetime because the securities law restrictions were not self-imposed, and the facts do not present an abuse situation.

Lastly, petitioner argues that an unrestricted valuation for the class B shares would be inconsistent with the underlying policy of the unified estate and gift tax system.

Respondent argues that the securities law restrictions lapsed at decedent's death and should not be considered in valuing the class B shares at the moment of death because the valuation of decedent's class B stock for Federal estate tax purposes must take into account any changes brought about by decedent's death.

Respondent also argues that the unified gift and estate transfer tax system does not require that the pre-death securities law restrictions be taken into account because the legislative history does not support petitioner's position, that the willing-buyer willing-seller standard provides an objective test for determining value, and that the same standard is used to determine the amount of a gift and the amount of property includable in the gross estate.

We believe the correct result in this case is pointed to by the decision of the Court of Appeals for the Ninth Circuit (the court to which an appeal in this case would normally be directed) in Ahmanson Found. v. United States, 674 F.2d 761 (9th Cir. 1981). For our present purposes, the essential facts in that case were as follows: Ahmanson, at his death, owned 15 percent of a savings and loan association of which 81 percent was owned by HFA, a holding company. Decedent controlled, through a revocable trust, 600 out of 1,000 shares of voting common stock of HFA, and an income interest in 11,000 out of 106,711 shares of nonvoting common stock of HFA. Also held in the revocable trust were all of the shares of Ahmanco, Inc., a corporate shell with no assets prior to