- 18 -
shares to the natural objects of his bounty for less
than an adequate and full consideration in money or
money’s worth. * * *
In Estate of Lauder v. Commissioner, supra, we made clear
that it is insufficient that an agreement serve a bona fide
business purpose. For the price set forth in the agreement to
control, the agreement also must not constitute a testamentary
device. Id.
B. Business Arrangement; Testamentary Device
We have no doubt that the 1987 redemption agreement served
both business and testamentary purposes. On brief, the executors
concede the following: “Decedent had dual motives for the 1987
Redemption Agreement: a succession plan for the Company and an
estate tax plan to transfer the bulk of his assets to * * * [his
kin], free and clear of federal and state estate taxes and
administration expenses.” Moreover, the executors admit:
“Decedent’s objective to perpetuate his company’s existence may
have, in theory, reduced the incentive to achieve the highest
possible price for his heirs.” Nevertheless, the executors
insist: “there is no evidence in the record from which one could
reasonably conclude as a factual matter that Decedent was willing
to sacrifice a higher purchase price at the expense of * * * [his
kin].”
We agree with that statement so far as it goes. It must be
remembered, however, that the kin would suffer only if the
agreement price for the shares was inadequate to fund death taxes
Page: Previous 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 NextLast modified: May 25, 2011