Estate of Morton B. Harper - Page 6



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                         (A) there is a transfer of an interest in a                  
                    corporation or partnership to (or for the benefit of) a           
                    member of the transferor's family, and                            
                         (B) the transferor and members of the transferor's           
                    family hold, immediately before the transfer, control             
                    of the entity,                                                    
               any applicable restriction shall be disregarded in                     
               determining the value of the transferred interest.                     
                    (2) Applicable restriction.--For purposes of this                 
               subsection, the term "applicable restriction" means any                
               restriction--                                                          
                         (A) which effectively limits the ability of the              
                    corporation or partnership to liquidate, and                      
                         (B) with respect to which either of the following            
                    applies:                                                          
                              (i) The restriction lapses, in whole or in              
                         part, after the transfer referred to in paragraph            
                         (1).                                                         
                              (ii) The transferor or any member of the                
                         transferor's family, either alone or collectively,           
                         has the right after such transfer to remove, in              
                         whole or in part, the restriction.                           
                    (3) Exceptions.--The term "applicable restriction"                
               shall not include--                                                    
                        *     *     *     *     *     *     *                         
                         (B) any restriction imposed, or required to be               
                    imposed, by any Federal or State law.                             
               Section 25.2704-2(b), Gift Tax Regs., further defines an               
          applicable restriction as follows:                                          
                    (b) Applicable restriction defined. An applicable                 
               restriction is a limitation on the ability to liquidate the            
               entity (in whole or in part) that is more restrictive than             
               the limitations that would apply under the State law                   
               generally applicable to the entity in the absence of the               
               restriction. * * *                                                     





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