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D. Were Agreements Substitutes for Testamentary
Dispositions?
We now consider whether the True companies’ buy-sell
agreements were adopted for the purpose of achieving testamentary
objectives. As previously stated, greater scrutiny applies to
intrafamily agreements restricting stock transfers in closely
held businesses. This analysis requires us to apply the
appropriate common law tests (along with other relevant factors)
to the particular facts of the cases at hand. No one test or
factor is determinative; rather, we must consider all relevant
factors to decide whether the buy-sell agreements were used as
substitutes for testamentary dispositions.
1. Testamentary Purpose Test
Respondent argues that the True companies’ buy-sell
agreements were not the result of arm’s-length dealings and were
designed to serve testamentary purposes. After evaluating the
following factors, we agree with respondent that Dave True had
testamentary objectives (conflated with the legitimate business
reasons mentioned above) for adopting and maintaining the True
family buy-sell agreements.
a. Decedent’s Health When He Entered Into
Agreements
Dave True was in good health when he entered into the first
buy-sell agreements (Belle Fourche, True Oil, True Drilling) with
his children in 1971 and 1973. However, by the time he made the
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