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interpreted the “bona fide business arrangement” and “not a
testamentary device” tests to be conjunctive (i.e., both tests
must be satisfied independently to give the agreement dispositive
effect). See Dorn v. United States, 828 F.2d 177, 182 (3d Cir.
1987); St. Louis County Bank v. United States, 674 F.2d 1207,
1210 (8th Cir. 1982); Estate of Lauder v. Commissioner, T.C.
Memo. 1992-736 (Lauder II). This means that a buy-sell agreement
can be both a bona fide business arrangement and a testamentary
device, with the result that it will not be given dispositive
effect for estate tax valuation purposes. See Lauder II.
In 1959, the Commissioner issued Revenue Ruling 59-60, which
was intended to “outline and review in general the approach,
methods and factors to be considered in valuing shares of the
capital stock of closely held corporations for estate tax and
gift tax purposes.” Rev. Rul. 59-60, 1959-1 C.B. 237. Revenue
Ruling 59-60 has been widely accepted as setting forth the
appropriate criteria to consider in determining fair market
value. See Estate of Newhouse v. Commissioner, 94 T.C. at 217.
Section 8 of the ruling addresses the effect of agreements
28(...continued)
1974-1 C.B. 277; Sept. 30, 1974 by T.D. 7327, 1974-2 C.B. 294;
Sept. 13, 1976 by T.D. 7432, 1976-2 C.B. 264, and Jan. 28, 1992
by T.D. 8395 (1992 amendment), 1992-1 C.B. 816. Only the 1992
amendment affected subsec. 20.2031-2(h), Estate Tax Regs., by
adding a cross-reference to sec. 2703 (and the regulations
thereunder) for special rules involving options and agreements
(including contracts to purchase) entered into (or substantially
modified after) Oct. 8, 1990. See infra pp. 79-81.
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