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demonstrate that the buy-sell agreement was comparable to similar
arm’s-length arrangements between unrelated parties” (arm’s-
length requirement) (emphasis added). They support this
statement by citing the legislative history of section 2703,
which states that the arm’s-length requirement of section
2703(b)(3) was not present in prior law. See supra p. 81.
According to petitioners, the heightened scrutiny that respondent
has applied to the True companies’ intrafamily buy-sell
agreements amounts to a presumption of testamentary intent that
could be rebutted only by meeting the arm’s-length requirement.
Petitioners characterize this as an impermissible, retroactive
application of section 2703.
Respondent counters that petitioners misconceive the import
of section 2703. To respondent, “the effect of section
2703(b)(3) was to elevate the arm’s-length nature of the terms of
the agreement from a factor to consider in determining
[testamentary] intent to an absolute requirement.” Thus,
respondent insists that the arm’s-length requirement was present
before the enactment of section 2703, citing cases that antedated
section 2703 and applied section 20.2031-2(h), Estate Tax Regs.
We agree with respondent.
As already shown, courts often have considered whether buy-
sell agreements were comparable to arm’s-length arrangements
between unrelated parties in cases that both predated and
postdated issuance of section 20.2031-2(h), Estate Tax Regs., and
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