Valuation of partnership interest requires strict adherence to net wealth rules and exclusion of reserves, with enforcement against noncompliance.

Valuation of a partner's interest must be based on the firm's net wealth on the valuation date, determined under the prescribed valuation rules; market value should be adopted where it exceeds book value beyond the permitted threshold. Reserves of all kinds are excluded from liabilities for this computation, so reserves such as the Development Rebate Reserve cannot be allowed as deductible liabilities. Assessing officers' defaults in applying these rules should be examined and appropriate action taken to ensure compliance.

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