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corporation to a departing shareholder is to redeem stock or to
compensate for services. Steffen v. Commissioner, 69 T.C. 1049,
1052-1053 (1978); Erickson v. Commissioner, 56 T.C. 1112, 1123
(1971); Estate of Bette v. Commissioner, T.C. Memo. 1977-404. In
each of those cases, we found that, under the agreement, the
payment from the corporation was made solely for the taxpayer's
stock. We especially consider a stock price set by the
corporation and shareholder if other evidence shows that the
price set equals the value of the stock. Smith v. Commissioner,
82 T.C. 705, 715-717 (1984) (we found that the corporation and
the shareholder intended for the payment to be solely to redeem
the taxpayer's stock). Thus, in deciding whether the $5 million
was paid for stock redemption or work in process, or both, we
begin by considering what CSB and decedent intended as shown by
the 1973 agreement and the 1988 amendment.
The 1973 agreement provided a formula to determine the
amount to be paid to decedent's estate, but did not specify the
amount. The 1988 amendment fixed the amount of CSB’s payment to
decedent’s estate.
CSB bought $5 million of insurance because decedent believed
his widow would need that amount to maintain her standard of
living. The purchase of life insurance helped CSB to finance
the payment to decedent's estate, helped ensure that CSB would
survive decedent’s death, eliminated the need to account for
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