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transferred over the value of consideration received will
constitute gifts under section 2512(b).
V. Impact of NonControlling Buy-Sell Agreements on Estate and
Gift Tax Valuations
Having held that the True companies’ buy-sell agreements do
not control fair market value for either estate tax or gift tax
purposes, we must decide whether noncontrolling buy-sell
agreements are factors to consider in valuing the subject
interests under sections 2031 and 2512.
For estate tax purposes, section 20.2031-2(h), Estate Tax
Regs., explicitly states that a buy-sell agreement price will be
disregarded in determining the value of securities unless it is
found that the agreement represents a bona fide business
arrangement and not a device to pass the decedent’s shares to the
natural objects of his bounty for less than adequate and full
consideration. Therefore, only if the agreement is both a bona
fide business arrangement and not a testamentary device would its
price have an effect on estate tax value. See Lauder II.
We applied this principle in Estate of Lauder v.
Commissioner, T.C. Memo. 1994-527, 68 T.C.M. (CCH) 985, 998-999,
1994 T.C.M. (RIA) par. 94,527, at 94-2741 (Lauder III), in which
we stated:
We agree with respondent that, in light of our
holding in * * * [Lauder II], it would be anomalous if
particular portions of the shareholder agreement are
now deemed relevant to the question of the fair market
value of decedent’s stock. At the risk of belaboring
the point, our responsibility is to determine the fair
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