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derived (or actually was derived) from arm’s-length dealings
between adverse parties.
c. Did Tax Book Value Pricing Formula Represent
Adequate and Full Consideration?
Petitioners make various arguments to support their
contention that the tax book value pricing formula used in the
True family buy-sell agreements represented adequate and full
consideration under section 20.2031-2(h), Estate Tax Regs., and
the Lauder II test. They contend that tax book value was
adequate and full consideration because (1) it equaled fair
market value at the dates of agreement for True Oil and Belle
Fourche; (2) book value was a common pricing formula among
related and unrelated parties at the dates of agreement; (3) the
parties testified that they thought the price was realistic when
they entered into the agreements; (4) there were bona fide
business reasons for using a tax book value formula price; and
(5) book value was not required to bear a predictable
relationship to the fair market value of underlying assets,
inasmuch as the True family had no plans to liquidate the True
companies.
First, petitioners observe that no court has required a
taxpayer to prove that a buy-sell agreement’s formula price
represented fair market value at either the date of agreement or
at the time of the transfers at issue. Moreover, petitioners
cite St. Louis County Bank v. United States, supra, for the
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