Estate of Albert Strangi - Page 17

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                    Congress recognized substantial valuation abuse in                
               the law as it existed prior to the enactment of I.R.C.                 
               sec. 2036(c) in 1987.  In 1990 Congress replaced                       
               section 2036(c) with a new Chapter 14, including                       
               sections 2701 through 2704, which sets out special                     
               valuation rules for transfer tax purposes.  It intended                
               these new sections to target transfer-tax valuation                    
               abuses in the intra-family transfers more effectively                  
               while relieving taxpayers of section 2036(c)’s broad                   
               sweep.  It wanted to value property interests more                     
               accurately when they were transferred, instead of                      
               including previously transferred property in the                       
               transferor’s gross estate.  “Discussion Draft” Relating                
               to Estate Valuation Freezes:  Hearing Before the House                 
               Comm. on Ways and Means, 101st Cong. 2d Sess. 102                      
               (April 24, 1990) [House hearing]; Estate Freezes:                      
               Hearing on “Discussion Draft” Before the Subcomm. on                   
               Energy and Agricultural Taxation and Subcomm. on                       
               Taxation and Debt Management of the Senate Comm. on                    
               Finance, 101st Cong. 1233 (June 27, 1990) [Senate                      
                    The new special valuation rules in Chapter 14                     
               departed substantially from the hypothetical willing                   
               buyer-willing seller standard.  The Treasury Department                
               recognized that valuing nonpublicly traded assets in                   
               family transactions for transfer tax purposes presented                
               a significant problem.  It testified to Congress that                  
               applying the hypothetical standard of a willing buyer-                 
               willing seller to family transactions allowed                          
               significant amounts to escape taxation.  Senate hearing                
               at 15.                                                                 
                    Congress enacted section 2703(a) to address                       
               abusive intra-family situations.  Section 2703(a)(1)                   
               addresses burdening a decedent’s property with options                 
               to purchase at less than fair market value.  Section                   
               2703(a)(2), which applies to this case, addresses other                
               restrictions that reduce the value of a decedent’s                     
               property for estate tax purposes but not in the hands                  
               of the beneficiary.  Congress contemplated that the                    
               section would apply to “any restriction, however                       
               created,” including restrictions implicit in the                       
               capital structure of a partnership or contained in a                   
               partnership agreement, articles of incorporation,                      
               corporate bylaws or a shareholders’ agreement.                         
               Informal Senate Report on S. 3209, 101st Cong., 2d                     
               Sess. (1990), 136 Cong. Rec. S15777 (October 18, 1990).                

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