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his bounty for less than an adequate and full consideration in
money or money’s worth.” Id. The factors mentioned are: The
relationship of the parties, the relative number of shares held
by the decedent, and other material facts. See id.
3. Case Law Following Issuance of Regulations and
Revenue Ruling 59-60
Cases decided after the issuance of section 20.2031-2(h),
Estate Tax Regs., and Revenue Ruling 59-60, supra, reflect new
expressions of the Wilson-Lomb test. Specifically, the formula
price under a buy-sell agreement was considered binding for
Federal estate tax purposes if: (1) The offering price was fixed
and determinable under the agreement; (2) the agreement was
binding on the parties both during life and after death, (3) the
agreement was entered into for bona fide business reasons,29 and
(4) the agreement was not a substitute for a testamentary
disposition30 (generally, the Lauder II test). See Lauder II
29We refer to this requirement as the business purpose prong
of the Lauder II test. See Estate of Lauder v. Commissioner,
T.C. Memo. 1992-736 (Lauder II). This is equivalent to the
requirement of sec. 20.2031-2(h), Estate Tax Regs., that the
agreement represent a bona fide business arrangement. See Lauder
II (using the terminology of this Court and the regulation
interchangeably); sec. 20.2031-2(h), Estate Tax Regs.
30We refer to this requirement as the nontestamentary
disposition prong of the Lauder II test. This is equivalent to
the requirement of sec. 20.2031-2(h), Estate Tax Regs., that the
agreement not be a device to pass the decedent’s shares to the
natural objects of his bounty for less than an adequate and full
consideration in money or money’s worth. See Lauder II (using
the terminology of this Court and the regulation
interchangeably); sec. 20.2031-2(h), Estate Tax Regs.
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