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fide business purpose. See Estate of Bischoff v. Commissioner,
supra at 39-40. However, even if we find that the option had a
bona fide business purpose, it will be disregarded if it served
as a device to pass decedent’s interest to the natural objects of
his bounty and to convey that interest for less than full and
adequate consideration. See Bommer Revocable Trust v.
Commissioner, T.C. Memo. 1997-380; Estate of Lauder v.
Commissioner, T.C. Memo. 1992-736; see also sec. 20.2031-2(h),
Estate Tax Regs. We find that the option provision in each of
the partnership agreements represents a testamentary device to
convey decedent’s interest to his son for less than full and
adequate consideration, and therefore we disregard it in
determining the value of those interests.
Petitioner argues that the options were not a testamentary
device because they were exchanged for full and adequate
consideration. Petitioner claims that the options were granted
in exchange for allowing decedent to participate as a 45- or 50-
percent partner in the partnerships without a substantial
contribution, either of cash or in kind, and that, therefore,
decedent’s agreement to concede to Fred Jr. all future
appreciation exceeding $10,000 was the product of a bona fide,
arm’s-length transaction. That is, Fred Jr. testified at trial,
and petitioner argues on brief, that Fred Jr.’s contribution to
the partnerships substantially outweighed decedent’s; namely,
that Fred Jr. had the original idea of seeking HUD contracts;
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