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D. Whether the Fact That CSB Was the Beneficiary Under the
Life Insurance Policies Determines Whether the Payments
to Decedent's Estate Were To Redeem Stock or for Work in
Process
Petitioner argues that, under section 20.2031-2(f)(2),
Estate Tax Regs.,7 Estate of Huntsman v. Commissioner, 66 T.C.
861, 875 (1976), and Estate of Clarke v. Commissioner, T.C.
Memo. 1976-328, the $5 million in life insurance proceeds was
a nonoperating asset of CSB because CSB owned the policies.
Petitioner contends that we should include the insurance proceeds
as a CSB asset in valuing decedent's stock.
We disagree. First, the fact that CSB was the beneficiary
under the insurance policies does not show whether the parties
agreed for the payment to be for stock and for any claim based
on work in process. Second, payments to a shareholder/employee
are not necessarily made to redeem stock merely because the
corporation owns property which was paid to the
shareholder/employee. Third, the insurance proceeds do not
7 Sec. 20.2031-2(f)(2), Estate Tax Regs., provides that, in
valuing stock where actual sales prices and bid and asked prices
are unavailable, the IRS considers the corporation’s net worth,
prospective earning power, and dividend-paying capacity. The
regulations state that other factors are also considered, such as
nonoperating assets, including life insurance policies payable to
or for the benefit of the corporation, to the extent that the
nonoperating assets have not been taken into account in
calculating net worth, prospective earning power, and dividend-
earning capacity.
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