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business. Thus, the buy-sell agreements enforced the active
ownership requirements that played a central role in Dave True’s
business philosophy. In this regard, courts have found that
using buy-sell agreements to assure continuity of company
management policies or to retain key employees are bona fide
business purposes that satisfy this prong of the Lauder II test.
See supra pp. 71-72.
The parties generally agree that the True family buy-sell
agreements were entered into for bona fide business reasons.43
Thus, for the reasons stated above, we find that the third prong
(business purpose prong) of the Lauder II test is satisfied.
43However, respondent disagrees with petitioners’ suggestion
that a finding of business purpose could preclude a finding of
testamentary intent. Petitioners cite dicta in St. Louis County
Bank v. United States, 674 F.2d 1207, 1210 (8th Cir. 1982), which
stated that the “fact of a valid business purpose could, in some
circumstances, completely negate the alleged existence of a tax-
avoidance testamentary device as a matter of law”. Petitioners’
brief states: “In this case, the business purposes for the
agreements are sufficient to establish that the agreements are
bona fide business arrangements. Petitioners do not rely solely
on those business purposes, however, to show that the agreements
are bona fide business arrangements.”
We agree with respondent that established case law and
regulatory authority require that the bona fide business purpose
and nontestamentary disposition prongs of the Lauder II test must
be satisfied independently. However, we acknowledge that in some
instances, the presence of a business purpose (e.g., a desire to
vest control of a company in an employee who is not related to
the testator by blood or marriage) may indicate that testamentary
motives are absent. This is not the situation in the cases at
hand. Alternatively, if the business purpose is to keep control
within the family, it is fully consistent with a testamentary
objective. In such a case, the presence of a business purpose
does not negate the testamentary purposes.
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