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agreements were among family members and there was no convincing
evidence of arm’s-length dealing. Moreover, the record shows
that Dave True exerted significant control over his children’s
investments in the True companies. Although the True children
may have agreed to the formula price provisions and other
restrictions imposed by Dave True, that does not prove, under the
circumstances, that those restrictions would be considered
reasonable from an arm’s-length perspective.
Fourth, petitioners argue that valid business reasons,
rather than testamentary designs, motivated the True family’s
decision to use a tax book value pricing formula. They explain
that the formula had to be (1) understandable to the parties, (2)
predictable, and (3) easily determinable to avoid future
conflicts and to accommodate the short timeframe (6 months from
date of withdrawal) within which tax book value had to be
computed and payments had to be made under the agreements. While
there might have been valid business reasons for choosing a tax
book value formula price, we note that legitimate business
purposes are often mixed with testamentary objectives in the
family context. See Lauder II. Thus, petitioners’ argument does
not dispose of the testamentary device and adequacy of
consideration issue.
Fifth, petitioners contend that tax book value was not
required to bear a predictable relationship to fair market value
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