- 64 -
of father’s bounty and that the option price was what adverse
parties dealing at arm’s length would have agreed to. See id. at
252-253. Accordingly, the Court concluded that the option was
neither a substitute for a testamentary disposition, nor a device
for avoiding estate tax, so that section 302(c) and (d) did not
apply. See id. at 253-254. Instead, son’s exercise of the
option was either a bona fide sale for adequate and full
consideration or, like Wilson and Lomb, completely outside the
scope of section 302 of the Revenue Act of 1926. See id. at 254.
Similarly, we stated in Estate of Littick v. Commissioner,
31 T.C. 181 (1958), that if “for the purpose of keeping control
of a business in its present management, the owners set up in an
arm’s-length agreement * * * the price at which the interest of a
part owner is to be disposed of by his estate to the other
owners, that price controls for estate tax purposes, regardless
of the market value of the interest to be disposed of”. Id. at
187 (emphasis added).
Other facts that courts considered in evaluating whether
buy-sell agreements should determine estate tax value included:
(1) Tax avoidance motives for entering into buy-sell agreements,
see May v. McGowan, 194 F.2d 396, 397 (2d Cir. 1952); Estate of
Littick, 31 T.C. at 186, (2) that the purchasers under the buy-
sell agreement were natural objects of the decedent-seller’s
bounty, see Hoffman v. Commissioner, 2 T.C. at 1179, and (3) that
Page: Previous 54 55 56 57 58 59 60 61 62 63 64 65 66 67 68 69 70 71 72 73 NextLast modified: May 25, 2011