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Thus, petitioners could have predicted that the ranchland
exchange transactions would create a disparity in which actual
fair market value would exceed the tax book value formula price
under the True Ranches buy-sell agreement.52
3. True Family Buy-Sell Agreements Were Substitutes
for Testamentary Dispositions
To summarize, we have found facts indicating that the buy-
sell agreements at issue in these cases (1) were not the result
of arm’s-length dealings and served Dave True’s testamentary
purposes and (2) included a tax book value formula price that was
not comparable to a price that would be negotiated by adverse
parties dealing at arm’s length and would not, over time, be
expected to bear a reasonable relationship to the unrestricted
fair market value of the ownership interests in the True
companies. In Lauder II, certain facts regarding how the
agreement was entered into allowed us to infer that the buy-sell
agreements served testamentary purposes. We then went on to
52The Trues argued that evidence of legitimate business
purposes for the ranchland exchange transactions should render
the step transaction doctrine inapplicable. They advanced an
analogous argument in the cases at hand. The Court of Appeals
for the Tenth Circuit acknowledged the evidence of business
purposes, but held that such evidence was not dispositive and
that the step transaction doctrine should still apply. See True
v. United States, 190 F.3d 1165, 1176-1177 (10th Cir. 1999). We
also note the following observation of the Court of Appeals for
the Tenth Circuit: “None of the individual steps in the
ranchland [exchange] transaction is the type of business activity
we would expect to see in a bona fide, arm’s length business deal
between unrelated parties”. True v. United States, 190 F.3d at
1179.
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