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in cases that preceded the enactment of section 2703. See, e.g.,
Dorn v. United States, 828 F.2d 177 (3d Cir. 1987); Estate of
Littick v. Commissioner, 31 T.C. 181 (1958); Bensel v.
Commissioner, 36 B.T.A. 246 (1937); Lauder II; Estate of
Carpenter v. Commissioner, T.C. Memo. 1992-653. Thus, although
this requirement was not explicitly set out in section 20.2031-
2(h), Estate Tax Regs. (as noted in the legislative history of
section 2703), the arm’s-length requirement has always been a
factor used by courts to decide whether a buy-sell agreement’s
price was determinative of value for estate tax purposes.
Further, we do not believe that the heightened scrutiny
applied to intrafamily buy-sell agreements essentially creates a
presumption of testamentary purpose that can only be rebutted by
a showing that the agreement satisfied the arm’s-length
requirement. As we have stated many times, no one factor is
dispositive, and all circumstances must be evaluated to determine
whether a buy-sell agreement is intended to serve as a substitute
for a testamentary disposition.
Even if we were to treat the arm’s-length requirement as a
“super factor” in our analysis, an impermissible, retroactive
application of section 2703 would not result. The arm’s-length
requirement played the same role in pre-section 2703 case law.
After surveying the cases that apply (either implicitly or
explicitly) the section 20.2031-2(h), Estate Tax Regs.,
requirement that a buy-sell agreement cannot be a testamentary
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