                        T.C. Memo. 2001-141



                      UNITED STATES TAX COURT



      JERROLD E. ARBINI AND HELEN C. ARBINI, Petitioners v.
           COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket No. 11324-98.                       Filed June 15, 2001.


     Michael P. Casterton, for petitioners.

     James R. Robb, for respondent.



             MEMORANDUM FINDINGS OF FACT AND OPINION


     RUWE, Judge:   Respondent determined deficiencies in

petitioners’ Federal income taxes and penalties as follows:

                                         Accuracy-Related
                                             Penalty
               Year         Deficiency      Sec. 6662
               1993          $44,235         $8,847
               1994           13,133          2,627
                               - 2 -

     After concessions,1 the issue for decision is whether

petitioners are entitled to charitable contribution deductions

under section 1702 for 1993 and 1994 in the amounts of $126,605

and $50,513, respectively, for the donation of newspapers made in

1991 to the San Francisco Academy of Comic Art.

                         FINDINGS OF FACT

     Some of the facts have been stipulated and are so found.

The first stipulation of facts, second stipulation of facts,

third stipulation of facts, and the attached exhibits are

incorporated herein by this reference.   Petitioners, Mr. Arbini

(hereinafter petitioner) and Mrs. Arbini, resided in Bozeman,

Montana, and Red Bluff, California, respectively, at the time

they filed their petition.

     On April 12, 1988, Robert Fagliano (Mr. Fagliano) purchased

309 leather bound volumes of various issues of three Montana

newspapers from a recycling company for $1,750.   The Montana

newspapers were complete, contained comic strips, and were in

good condition.   At the time of the purchase, petitioner was an

equal partner with Mr. Fagliano in a waste disposal business.

Petitioner paid Mr. Fagliano one-half of the cost of the Montana



     1
      Respondent concedes that petitioners are not liable for the
accuracy-related penalties under sec. 6662(a) for the taxable
years 1993 and 1994.
     2
      Unless otherwise indicated, all section references are to
the Internal Revenue Code in effect for the years in issue.
                               - 3 -

newspapers and obtained a 50-percent ownership interest in the

newspapers.   The Montana newspapers were stored in Mr. Fagliano’s

garage at his home in Bozeman, Montana.   Mr. Fagliano did not

take out separate insurance on the Montana newspapers, nor did he

increase his homeowner’s insurance beyond its then current

$125,000 coverage.   At the time the Montana newspapers were

purchased, neither petitioner nor Mr. Fagliano was a dealer in

rare or early newspapers.

     In 1990, a decision was made to donate the newspapers to the

San Francisco Academy of Comic Art (SFACA).   The SFACA was

founded by Bill Blackbeard (Mr. Blackbeard) in 1969 as a research

center and library devoted to the American comic strip.   The

SFACA is a qualified section 170(c) organization.   Mr.

Blackbeard, the director of the SFACA, was not interested in the

Montana newspapers and provided the name of Chris Berglas (Mr.

Berglas) to facilitate an exchange of newspapers in order to

provide the SFACA with newspapers it preferred.

     On July 5, 1990, Mr. Berglas, proprietor of The Authentic

Journal, a business involved in the retail of newspapers, agreed

to evenly exchange certain Los Angeles and Chicago newspapers for

the Montana newspapers.   The agreement required the Montana

newspapers to be shipped to Mr. Berglas, who would then deliver

the Los Angeles and Chicago newspapers to the SFACA.   On August

9, 1990, the Montana newspapers were shipped from Bozeman,
                                   - 4 -

Montana, to Mr. Berglas in Gardena, California.      The Montana

newspapers were not insured when they were shipped to Mr.

Berglas.    In January of 1991, Mr. Berglas delivered the Los

Angeles and Chicago newspapers to the SFACA.

     The following Los Angeles and Chicago newspapers were

donated to the SFACA in January of 1991:3

     1.    Los Angeles Herald, Los Angeles Herald-Express:      A 6-

day-a-week newspaper.    A total of 6,260 newspapers representing

an unbroken run from 1931 through 1950.

     2.    Los Angeles Examiner:    A 7-day-a-week newspaper.    A

total of 990 newspapers, including Sunday comics, representing

the time period of December 1903, through December 1906, with

four volumes missing from 1903 to 1906 (single issue volumes).

Additionally, a total of 13,320 newspapers representing the time

period of January 1907 through December 1918, and consisting of

an average of three editions per day including four duplicate

volumes for the years 1907 through 1918.

     3.    Chicago Tribune:   A 7-day-a-week newspaper.   A total of

13,140 newspapers, including Sunday comics, representing the time




     3
      The parties agree that the Los Angeles and Chicago
newspapers were donated to the San Francisco Academy of Comic Art
and that petitioners are entitled to a charitable contribution
deduction for one-half the value of the Los Angeles and Chicago
newspapers.
                               - 5 -

period of January 1915 (only 7 months for 1915) through June 1951

(single issue volumes).

In total, 33,710 newspapers were donated to the SFACA with a

combined weight of approximately 2,170 pounds.    The newspapers

were in firmly bound volumes and were in above-average condition.

     In 1998, Ohio State University purchased the entire

newspaper collection of the SFACA for $100,000.    The Los Angeles

and Chicago newspapers donated by petitioner and Mr. Fagliano

constituted a small portion of the collection purchased by Ohio

State University.

     Petitioners’ Federal income tax return for 1991 included a

Form 8283, Noncash Charitable Contributions, claiming a

charitable contribution of $589,925 attributable to one-half of

the value of the Los Angeles and Chicago newspapers donated to

the SFACA.   Attached to petitioners’ return was an appraisal,

dated January 25, 1991, from Hal Verb (Mr. Verb).    In the

appraisal, Mr. Verb stated that the estimated saleable value of

the newspapers, not including the magazine and Sunday comic

sections, was $1,179,850.4   On the basis of the percentage

limitations on charitable deductions, petitioners limited the

amount of their charitable deduction for the newspapers for 1991

to $144,448 and carried the excess contribution forward to 1992.


     4
      Mr. Verb determined that the newspapers had an average
value of $35 per issue and multiplied this figure by 33,710, the
number of issues donated to the SFACA.
                                - 6 -

For 1992, petitioners claimed $42,738 as a charitable deduction

for the newspapers and carried the excess contribution forward to

1993.   For 1993, petitioners claimed a charitable contribution

carryover of $402,699, but limited the amount of their charitable

deduction to $126,605, and carried the excess contribution

forward to 1994.   For 1994, petitioners claimed a charitable

contribution carryover of $276,094, but limited the amount of

their charitable deduction to $50,513, and carried the excess

contribution forward to 1995.

     On March 24, 1998, respondent issued a notice of deficiency

for the years 1993 and 1994.    In the notice of deficiency,

respondent determined that the fair market value of petitioners’

50-percent share of the Los Angeles and Chicago newspapers

donated to the SFACA was not greater than $5,000.    Because

petitioners claimed charitable contribution deductions exceeding

$5,000 in prior years, respondent eliminated the carryovers to

1993 and 1994.   Petitioners timely filed a petition to this Court

seeking a redetermination.   In May of 2000, Mr. Verb issued

petitioner an updated appraisal of the newspapers, this time

including the value of the magazine, Sunday comic, and daily

comic strip sections.   In his appraisal, Mr. Verb determined that

the magazine, Sunday comic, and daily comic sections were worth

$426,947.50.
                                - 7 -

                               OPINION

       The issue for decision is the fair market value of the

donated Los Angeles and Chicago newspapers for purposes of

determining the proper amount of petitioners’ charitable

contribution deductions.    The parties agree that petitioners are

entitled to a charitable contribution deduction for one-half the

value of the newspapers; however, the parties disagree as to the

appropriate market to be used and the fair market value of the

newspapers.

       Section 170 allows an individual to deduct charitable

contributions, subject to certain percentage limitations, with a

carryover of any excess contributions.    See sec. 170(a), (b),

(d).    If a charitable contribution is made in property other than

money, the amount of the taxpayer’s contribution is the fair

market value of the property at the time of the contribution.

See sec. 1.170A-1(c), Income Tax Regs.    Section 1.170A-1(c)(2),

Income Tax Regs., defines fair market value as “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 a reasonable knowledge of relevant facts.”

The fair market value of donated property as of a given date is a

question of fact to be determined from the entire record.      See

Goldstein v. Commissioner, 89 T.C. 535, 544 (1987); Skripak v.
                                 - 8 -

Commissioner, 84 T.C. 285, 320 (1985); Zmuda v. Commissioner, 79

T.C. 714, 726 (1982), affd. 731 F.2d 1417 (9th Cir. 1984).

     Section 170 and the regulations promulgated thereunder are

silent regarding the market to be used in determining the fair

market value of donated property.    However, it has been

recognized that the valuation test for charitable contribution

deduction purposes is generally the same as that used for estate

and gift tax purposes.    See United States v. Parker, 376 F.2d

402, 408 (5th Cir. 1967); Lio v. Commissioner, 85 T.C. 56, 66

(1985), affd. sub nom. Orth v. Commissioner, 813 F.2d 837 (7th

Cir. 1987); Anselmo v. Commissioner, 80 T.C. 872, 881 (1983); see

also Anselmo v. Commissioner, 757 F.2d 1208, 1214 (11th Cir.

1985) (“In the usual case, however, there should be no

distinction between the measure of fair market value for estate

and gift tax and charitable contribution purposes.”), affg. 80

T.C. 872 (1983).     Section 20.2031-1(b), Estate Tax Regs., and

section 25.2512-1, Gift Tax Regs., provide that the fair market

value of an item of property is to be determined in the market in

which such item is “most commonly sold to the public.”      In the

normal situation, a sale “to the public” refers to a sale to the

“retail customer who is the ultimate consumer of the property.”

Anselmo v. Commissioner, 80 T.C. at 882.     The “ultimate consumer”

is deemed to be a customer who does not hold the item for

subsequent resale.     Goldman v. Commissioner, 388 F.2d 476, 478
                                - 9 -

(6th Cir. 1967), affg. 46 T.C. 136 (1966); Lio v. Commisisoner,

supra at 70.   In this context, the term “retail” does not mean

that the most expensive source is the only source for determining

fair market value.    Lio v. Commissioner, supra at 70.   The

determination of the appropriate market for valuation purposes is

a question of fact.    See Anselmo v. Commissioner, 757 F.2d at

1213; Lio v. Commissioner, supra at 66-67; Chou v. Commissioner,

T.C. Memo. 1990–90, affd. without published opinion 937 F.2d 611

(9th Cir. 1991).

     The parties identify two markets for old newspapers.       The

first is the retail market.5   In the retail market, individual

newspapers are sold to purchasers interested in obtaining a

newspaper from a specific date.    Generally, purchasers in the

retail market desire a newspaper from their date of birth or from

the date they were married, or from a date on which a significant

event occurred.    The sale of these birthday, anniversary, and

significant event newspapers is usually done by newspaper

dealers.   Newspaper dealers obtain the old newspapers and

advertise their availability for sale to individual purchasers.

Purchasers order a newspaper from the specific date that they are

interested in and the dealer provides the newspaper, usually in



     5
      For purposes of this case, we use the term “retail” to
refer to the market where sales of individual newspaper issues or
comic strips are made to different purchasers interested in
specific issues or comic strips.
                               - 10 -

some type of presentation folder.     The sales price of these

newspapers varies depending on the condition, content, and date

of the newspaper.   The evidence presented by the parties reflects

that the average price for an old newspaper in the retail market

is between $25 and $40, although issues reporting significant

events generally sell for much higher amounts.6     Additionally, an

individual newspaper may retail for a higher amount depending on

the presentation of the newspaper.7     Daily and Sunday comic

sections are also sold in the retail market to individual

consumers interested in specific characters or strips.

     The other market for old newspapers is the wholesale

market.8   Generally, purchasers in the wholesale market consist

of newspaper collectors and newspaper dealers interested in

purchasing a collection of newspapers.     Collectors generally

purchase a newspaper collection for their own personal use, while

dealers will purchase a collection in order to sell individual

issues in the retail market.   In order for dealers to sell



     6
      For example, a newspaper dated May 23, 1934, might retail
for $95 due to its reporting the death of Bonnie and Clyde,
whereas a newspaper from May 26, 1935, might retail for $40 due
to its reporting of Babe Ruth hitting his 714th home run.
     7
      For example, a newspaper presented in a clear vinyl
portfolio would generally retail for much less than the same
newspaper presented in a gold-leaf frame.
     8
      For purposes of this case, we use the term “wholesale” to
refer to a market where collections of newspapers are sold to
individuals.
                                - 11 -

individual issues in the retail market, they must remove the

issues from their bindings, prepare them for sale, and locate

willing buyers for each date.    The purchase price of a newspaper

collection in the wholesale market depends on a variety of

factors, including the condition, content, and date and title of

the newspapers.   The value attributable to an individual issue

generally diminishes when it is sold as part of a collection.

     Both parties relied on the reports and testimony of expert

witnesses for purposes of determining the appropriate market and

the fair market value of the donated Los Angeles and Chicago

newspapers.   Valuation is an approximation derived from all the

evidence.   See Helvering v. Safe Deposit & Trust Co., 316 U.S.

56, 66-67 (1942); Silverman v. Commissioner, 538 F.2d 927, 933

(2d Cir. 1976), affg. T.C. Memo. 1974-285; Estate of Davis v.

Commissioner, 110 T.C. 530, 537 (1998).     The opinions of experts

are admissible and relevant to the issue of value, but the

opinions must be weighed in light of each expert’s qualifications

and all other relevant evidence of value.    See Johnson v.

Commissioner, 85 T.C. 469, 477 (1985).    We are not bound by these

opinions and may reach a decision based on our own analysis of

all the evidence in the record.    See Helvering v. National

Grocery Co., 304 U.S. 282, 295 (1938); Estate of Newhouse v.

Commissioner, 94 T.C. 193, 217 (1990).    We may accept the opinion

of an expert in its entirety, see Buffalo Tool & Die
                              - 12 -

Manufacturing Co. v. Commissioner, 74 T.C. 441, 452 (1980), or we

may be selective in the use of any portion, see Parker v.

Commissioner, 86 T.C. 547, 562 (1986).

     Petitioners argue that the fair market value of the Los

Angeles and Chicago newspapers in the retail market at the time

of the donation was $1,549,796.50 and that petitioners’

charitable contribution is $774,898.10.9   Petitioners rely on the

reports and testimony of their expert, Mr. Verb.   Mr. Verb’s

qualifications for valuing the newspapers includes:   (1) Flea

market experience; (2) operation of a comic book store from 1971

to 1975; (3) attendance and participation in comic conventions

since the early 1970's; and (4) sales at collectibles conventions

since the early 1970's.   Mr. Verb’s experience in selling

newspapers is limited to individual sales in the retail market,

and he testified that he had no experience in dealing with a

collection of newspapers containing over 30,000 issues.

     Mr. Verb computed the value of the newspapers by determining

the average retail price for one individual issue and then

multiplying that price by the total number of newspapers.



     9
      Mr. Verb determined, and petitioners originally argued,
that the overall value of the donated newspapers was
$1,606,797.50, and that petitioners’ charitable contribution was
$803,398.75. In their reply brief, petitioners concede that they
overvalued the newspapers because they did not account for the
fact that the Sunday comics were printed on both sides of the
newspapers; thus, their value was only one-half of the amount
attributed to them by Mr. Verb.
                              - 13 -

Specifically, Mr. Verb determined that the newspapers had an

average estimated saleable value of $35 per issue, based on his

own personal experience in handling and selling newspapers and

the retail price for individual newspapers listed in an

advertisement of the largest distributor of retail newspapers in

the United States.   Mr. Verb valued the magazine, Sunday comic,

and daily comic strip sections separately and added this figure

to the value he determined for the newspapers.10    In valuing the

daily and Sunday comic strip sections, Mr. Verb assumed that they

would be cut out of the newspapers and sold individually.11

     Mr. Verb did not reduce his valuation to account for:    (1)

The number of transactions required to sell each individual issue

and comic strip; (2) the costs required to prepare the individual

issues and comic strips for sale to purchasers; and (3) the costs

which would be incurred in storing the newspapers and locating

willing buyers for each date contained in the collection.     Mr.

Verb did not consider the fact that the Los Angeles and Chicago

newspapers had been evenly exchanged for the Montana newspapers

which had been purchased for only $1,750 in 1988.




     10
      Although petitioners argue that the magazine sections have
a separate value, Mr. Verb did not assign a value to them.
     11
      However, Mr. Verb testified that an individual newspaper
would generally not have any value for birthday or anniversary
purposes if comics were cut out of it.
                                - 14 -

     Respondent argues that the fair market value of the Los

Angeles and Chicago newspapers in the wholesale market at the

time of the donation was $14,271.12      Respondent relies on the

report and testimony of Timothy Hughes (Mr. Hughes) to establish

the fair market value of the newspapers.      Mr. Hughes started in

the rare newspaper business in 1976 and currently maintains an

inventory of over one million newspapers dating from 1550 through

1993.     He publishes six catalogs per year containing listings of

historic newspapers for sale, and he also maintains a website

listing newspapers for sale.    Mr. Hughes has spent more than 23

years working to establish a mailing list of newspaper collectors

and as of December 1998, he had 755 active buyers on the mailing

list.     Mr. Hughes regularly buys and sells newspaper collections

and also provides individual issues for sale to retail customers.

He is a member of the board of advisers of Warman’s Americana &

Collectibles price guide, a reference source for American

collectibles, and produces the annual price list for early and

rare newspapers found in the guide.      Mr. Hughes has provided

consulting services, including valuations, to (1) the Newseum,13

(2) Sotheby’s and Christie’s auction firms in New York City, and

(3) leading book and autograph dealers.


     12
      Thus, the value of petitioners’ 50-percent interest in the
newspapers at the time of the donation would have been $7,135.50.
     13
      The Newseum is a media museum located in the Washington,
D.C., metro area, which contains newspaper exhibits.
                              - 15 -

     Mr. Hughes felt that willing buyers of the Los Angeles and

Chicago newspapers included newspaper collectors, newspaper

dealers, book dealers, magazine dealers, and others who had a

serious interest in newspaper collections.   Mr. Hughes valued the

newspapers according to condition, content, and date and title.

Mr. Hughes looked at comparable sales of newspaper collections

that he had purchased for his business to aid in determining the

fair market value of the newspapers.14   He used the comparable

sales as a guideline to determine an annual price for the

newspaper runs based on their time period.   Mr. Hughes also

relied on prices contained in Warman’s Americana & Collectibles

price guide, for which he annually produces the price list for

early and rare newspapers.   In assigning a price to annual runs

of newspapers contained in the collection, Mr. Hughes accounted

for the fact that newspaper runs from certain years or time



     14
      Generally, comparable sales of similar properties that are
reasonably proximate in time represent the best evidence of fair
market value. See Estate of Spruill v. Commissioner, 88 T.C.
1197, 1229 n.24, 1233 (1987); Estate of Rabe v. Commissioner,
T.C. Memo. 1975-26, affd. without published opinion 566 F.2d 1183
(9th Cir. 1977). The comparable sales relied upon by Mr. Hughes
occurred primarily in the years 1995 to 1997. In some cases,
sales that occurred during years other than those in issue are
helpful in determining fair market value because those sales may
indicate the fair market value for the years in issue. See
Estate of Spruill v. Commissioner, supra at 1233; Estate of
Gilford v. Commissioner, 88 T.C. 38, 52-55 (1987); Williford v.
Commissioner, T.C. Memo. 1992-450. Mr. Hughes justified his use
of comparable sales in later years by noting in his appraisal and
at trial that the fair market value of the newspapers has changed
very little from 1991 until the present.
                                - 16 -

periods were more valuable based on such ongoing events as World

War I and World War II, the notoriety of gangster activities, and

the significant sports stars.

     Mr. Hughes valued issues containing significant events on a

retail basis, as if they were sold individually.   Mr. Hughes also

placed an additional value on the newspapers for the Sunday

comics.   Mr. Hughes determined that the issues containing

significant events and the Sunday comic sections were worth

approximately 25 percent of their retail value when sold as part

of a large collection, and he discounted his valuation to reflect

this determination.15

     In valuing the Los Angeles and Chicago newspapers, Mr.

Hughes divided the newspapers into the following three groups:

(1) the Los Angeles Herald, Los Angeles Herald-Express; (2) Los

Angeles Examiner; and (3) Chicago Tribune.   Mr. Hughes did not

place a value on the daily comic strip sections for any of the

newspapers.16


     15
      For example, Mr. Hughes determined that the issues of the
Los Angeles Examiner from 1903 to 1906 contained three issues
with significant events which would retail for $50, $85, and
$255, if sold individually. To account for the issues being part
of a large collection, Mr. Hughes multiplied the combined value
of $390 by 25 percent. Thus, Mr. Hughes determined a value of
$98 for the significant issues when sold as part of a large
collection.
     16
      Mr. Hughes testified that cutting a daily comic strip out
of an issue ruins that issue. As we noted earlier, Mr. Verb also
testified that an individual newspaper would generally not have
                                                   (continued...)
                               - 17 -

     Mr. Hughes felt the Los Angeles Herald and Los Angeles

Herald-Express runs were above average in value based on the

facts that they contained news on World War II, gangster

activities, and notable sports stars.   Specifically, Mr. Hughes

determined that annual runs from the 1930's were worth $135, and

annual runs from the 1940's and early 1950's were worth $125.

Significant events issues from these periods accounted for an

additional $202 of the total value that Mr. Hughes determined.

He did not determine an additional value for Sunday comics from

these newspapers.17   Overall, Mr. Hughes determined that the

issues from this 20-year period were worth $2,792.

     Mr. Hughes felt that annual runs from the Los Angeles

Examiner for the years 1903 to 1906 were worth only $30 due to

the relative lack of historic events of interest to collectors

and lack of persons still alive who were born in those years, and

further reduced his valuation based on the fact that these runs

were only 68 percent complete.   Mr. Hughes placed additional


     16
      (...continued)
any value for birthday or anniversary purposes if comics were cut
out of it.
     17
      Mr. Verb also did not determine a value for Sunday comics
from these newspapers. In the first stipulation of facts, the
parties specifically identified which newspaper runs contained
Sunday comics. The description of the Los Angeles Herald and Los
Angeles Herald-Express does not contain a reference to Sunday
comics. On the basis of the failure of both parties’ experts to
assign any value and the absence of any reference in the first
stipulation of facts, we assume that the collection did not
contain Sunday comics for this group of newspapers.
                                - 18 -

values of $568 and $98, respectively, to account for Sunday

comics and significant events issues.    With respect to the issues

from 1907 to 1916, Mr. Hughes determined a value of $50 per

annual run.    He increased the value to $100 per annual run for

the years 1917 and 1918 due to news coverage of World War I.      An

additional value of $690 was added to account for the significant

events issues.    Mr. Hughes did not determine an additional value

for Sunday comics from newspapers for the years 1907 through

1918.18    Overall, Mr. Hughes valued the Los Angeles Examiner

newspapers at $3,613.

     Finally, Mr. Hughes determined a value for the Chicago

Tribune newspapers.    In valuing these annual runs from 1915

through 1951, he accounted for the facts that the newspapers

contained war coverage, the “gangster era” in Chicago, and that

there was more interest in individual issues for birthday and

anniversary purposes because Chicago was the largest city in the

Midwest.    Mr. Hughes valued annual runs of the Chicago Tribune at

between $75 and $175.    Mr. Hughes placed additional values of

$2,215 and $378, respectively, to account for Sunday comics and

significant events issues.    Overall, Mr. Hughes valued the

Chicago Tribune newspapers at $7,866.    Adding the three groups


     18
      Conversely, Mr. Verb determined a value for Sunday comic
sections for the Los Angeles Examiner issues from 1907 through
1918. However, the description of the Los Angeles Examiner in
the first stipulation of facts does not contain a reference to
Sunday comics for the years 1907 to 1918.
                               - 19 -

together, Mr. Hughes determined that the Los Angeles and Chicago

newspaper collection had a fair market value of $14,271 as of the

contribution date.

     In his appraisal, Mr. Hughes distinguished between valuing

newspapers individually and valuing collections of newspapers.

He explained that while a person might pay $35 for an issue from

his date of birth, or a collector curious about the news on a

particular date might pay $5 for the same issue, the value of

that issue diminishes significantly when it is purchased as part

of a large collection of newspapers and might be worth only $.30.

At trial, Mr. Hughes noted that the retail market for the early

1900's newspapers would be limited, based on the fact that there

were fewer people alive in 1991 who were born or married in that

time period.19   Overall, Mr. Hughes testified that he went with

an “absolute optimum” for value and determined a maximum fair

market value for the entire collection.

     The first issue we must decide is the appropriate market to

use for purposes of determining the fair market value of the Los

Angeles and Chicago newspapers.   Respondent contends that the

appropriate market is the wholesale market because the newspapers

would most commonly be sold to newspaper collectors, or to

newspaper dealers who would subsequently prepare the individual


     19
      Mr. Hughes also testified that he had never been asked by
a potential purchaser for a newspaper from the date of birth of
an ancestor.
                                 - 20 -

issues for sale in the retail market.       Petitioners claim that the

appropriate market is the retail market because the newspapers

and comic sections could have been sold to individuals interested

in obtaining specific issues or comic strips.       Petitioners also

claim petitioner and Mr. Fagliano were not the ultimate consumers

of the newspapers because they did not purchase the newspapers

and comic strips for their own use or subsequent donation.

Petitioners contend that the newspapers were purchased with an

intent to sell individual issues to consumers interested in

purchasing birthday and anniversary issues, or specific comic

strips.

     In Anselmo v. Commissioner, 80 T.C. at 872, we were required

to value a donation of 461 low quality gemstones.       Jewelry stores

would generally not sell the gemstones to individual purchasers

but would incorporate the gemstones into separate pieces of

jewelry.   See id. at 877-878.    We rejected the taxpayers’

contention that the stones should be valued individually, based

on the price that each individual gemstone would sell for in

retail jewelry stores.   See id. at 881.       We found that such

stones were not commonly sold to individual purchasers but rather

that the appropriate market for sale was to retail jewelers for

use in the manufacture of jewelry.        See id. at 882.   We reasoned

that no one farther down the distribution chain would purchase

the gems in their unmodified state and that the gemstones were
                                 - 21 -

consumed in the process of manufacturing items of jewelry.     See

id. at 883.

     In Akers v. Commissioner, 799 F.2d 243 (6th Cir. 1986),

affg. T.C. Memo. 1984-490, the court relied on our reasoning in

Anselmo v. Commissioner, 80 T.C. 872 (1983), in holding that a

tract of land containing approximately 1,261 acres should be

valued based on comparable sales of other tracts of land

containing over 1,000 acres.     See Akers v. Commissioner, supra at

244-246.    The court rejected the taxpayers’ contention that the

value of the property should be determined based on the value of

the property as if it was subdivided into 24 lots averaging 52.5

acres each.    See id. at 245.   The court reasoned that the

“ultimate consumer” of a 50-acre lot would normally not have the

time, inclination, expertise, or capital to buy the entire

property with a view to subdivision and sale of the excess.       Id.

at 246.    The court distinguished its situation from one where

property consists of multiple items available for sale, by

explaining that the property in the case at hand was not

subdivided and ready for immediate sale in the retail market.

See id. at 247.   We find the reasoning in Anselmo v.

Commissioner, supra, and Akers v. Commissioner, supra, applicable

to the instant case.
                              - 22 -

     The Los Angeles and Chicago newspaper collection contained

33,710 issues, all in firmly bound volumes.20   We believe that

bound volumes of newspapers containing thousands of issues would

generally not be sold to individual purchasers interested in a

specific issue or comic strip; they would most commonly be sold

to newspaper collectors, newspaper dealers, and others interested

in obtaining a newspaper collection.21   If petitioner and Mr.

Fagliano intended to sell individual issues, this would not be a

“subsequent resale” of the newspapers because the items being

sold would be individual issues and comic strips, not the bound

volumes of newspapers.   The individual issues contained in the

Los Angeles and Chicago newspapers could not readily be sold to

purchasers interested in birthday, anniversary, and significant

event newspapers because the individual issues were not ready for

immediate sale.   See Akers v. Commissioner, supra at 247.   The


     20
      Neither party established the number of bound volumes
contained in the collection or which specific individual issues
were contained in each volume. At trial, Mr. Verb provided a
rough estimate of approximately 50 issues in each bound volume;
however, he also testified that one bound volume contains 3
months of issues. In his appraisal, respondent’s expert, Timothy
Hughes (Mr. Hughes), stated that bound volumes of newspapers from
the post 1940's might contain as few as 15 days of newspapers,
while bound volumes of newspapers from the 18th century contain
as many as one year of newspapers. In the first stipulation of
facts, some of the Los Angeles and Chicago newspapers were
identified as being single issue volumes, however, neither party
addressed this point.
     21
      We note that petitioners do not dispute that neither
petitioner nor Mr. Fagliano was a dealer in rare or early
newspapers at the time the Montana newspapers were purchased.
                               - 23 -

individual issues would have to be removed from their bindings,

made available for presentation, and willing purchasers would

have to be located for each date in order for the entire

collection to be sold.    An “ultimate consumer” would generally

not purchase an entire collection of 33,710 newspapers in bound

volumes, or even one bound volume, for the purpose of obtaining

one specific issue or comic strip.      We conclude that the ultimate

consumers of the bound newspapers in issue are newspaper

collectors, newspaper dealers, and others interested in obtaining

a newspaper collection.    Accordingly, we hold that the

appropriate market for purposes of determining the fair market

value of the Los Angeles and Chicago newspapers is the wholesale

market.

     After identifying the appropriate market, fair market value

is determined by the amount that consumers would pay, in this

market, for the items in question on the date of contribution.

See Goldstein v. Commissioner, 89 T.C. at 544.      Relevant

considerations include the amount that the taxpayer paid for the
                              - 24 -

property22 and how the property is used by the donee.23   See Lio

v. Commissioner, 85 T.C. at 71; Chiu v. Commissioner, 84 T.C.

722, 734-736 (1985); Skripak v. Commissioner, 84 T.C. at 322.

     It is unrealistic to assume that multiplying an average

price of $35 by the 33,710 issues contained in the bound volumes,

and then placing an additional value on the Sunday comic and

daily comic strip sections contained therein, accurately measures

the fair market value of the Los Angeles and Chicago newspapers.

Even Mr. Verb admitted that he would not purchase the Los Angeles

and Chicago newspapers based on a price of $35 per issue.    It

would involve an enormous amount of time, expense, and effort to

sell each of the 33,710 issues.   At trial, respondent’s expert

testified that it would take over 100 years to sell each issue

individually.   Mr. Verb could not estimate the amount of time it

would take to sell each issue individually.   Additionally, the

33,710 issues were in firmly bound volumes.   The binding would


     22
      The Los Angeles and Chicago newspapers were evenly
exchanged for the Montana newspapers, which were purchased in
1988 for $1,750. We note that the Montana newspapers were not
insured during storage or during delivery to Mr. Berglas, despite
the fact that they were evenly exchanged for the Los Angeles and
Chicago newspapers which petitioners claim were worth
approximately $1.5 million.
     23
      In 1998, the SFACA sold its entire collection of
newspapers, of which the Los Angeles and Chicago newspapers
constituted a small portion thereof, to Ohio State University for
$100,000. Petitioners do not dispute Mr. Hughes’ estimate that
the SFACA collection weighed over 75 tons and consisted of
approximately 6,666 bound volumes containing approximately
200,000 newspapers.
                              - 25 -

have to be destroyed, and all the issues would have to be removed

in order to prepare individual issues for sale.   Mr. Verb

testified that when he owned his store, he had to employ a person

part-time just to cut comic strips out of newspapers.   Finally,

the evidence in the record reflects that individual issues sold

to retail customers are usually packaged in some form of

presentation folder.

     The value petitioners attribute to the newspapers fails to

account for relevant time and expense factors involved in selling

the newspapers in the retail market.   Petitioners rely on Mr.

Verb’s valuation which was simply based on determining the

average retail price for an individual newspaper and multiplying

this price by the number of issues contained in the collection,

without consideration of other factors which would affect the

value of the newspapers.   Neither petitioners nor Mr. Verb

expressed an opinion as to what the value of the newspapers and

comic sections would be if they were not sold to individual

purchasers interested in specific issues or comic strips.

     Respondent relied on the valuation determination of Mr.

Hughes.   Mr. Hughes’ appraisal was thorough, detailed, provided

explanations, and was supported by accompanying exhibits.     His

testimony was consistent with the analysis in his appraisal, and

he demonstrated considerable knowledge in the area of early and

rare newspapers.   Mr. Hughes is a well-known newspaper collector
                             - 26 -

with extensive experience dealing in collections similar to the

Los Angeles and Chicago newspaper collections.    Additionally, he

has experience in the retail sale of birthday and anniversary

newspapers.

     For the years before those in issue, petitioners claimed the

following charitable contribution deductions for the Los Angeles

and Chicago newspapers:

               Year                     Amount
               1991                    $144,448
               1992                      42,738
                 Total                  187,186

Therefore, unless the fair market value of the newspapers as of

January of 1991, was greater than $187,186, petitioners are not

entitled to charitable contribution deductions for 1993 or 1994.

After reviewing the reports and testimony of the experts, and

based on all the evidence in the record, we believe that Mr.

Hughes’ appraisal considered the relevant factors for purposes of

valuing the newspaper collection, and his valuation determination

reflects the approximate value of the collection.24   Accordingly,

we hold that petitioners are not entitled to charitable




     24
      We note that, in this situation, it is sufficient that we
find, as we have, that the fair market value of the newspapers as
of January of 1991 was not in excess of the amount of charitable
contribution deductions that petitioners took for the newspapers
in previous years. See, e.g., Hamm v. Commissioner, 325 F.2d
934, 939-940 (8th Cir. 1963), affg. T.C. Memo. 1961-347; Rimmer
v. Commissioner, T.C. Memo. 1995-215.
                             - 27 -

contribution deductions for 1993 or 1994 for the donation of the

Los Angeles and Chicago newspapers made in 1991 to the SFACA.


                                   Decision will be entered

                              for respondent as to the

                              deficiencies.
