- 76 -
In Estate of Reynolds v. Commissioner, 55 T.C. at 194, we
considered whether the ultimate disparity between unrestricted
market price per share and the formula price could have been
predicted by the parties at the time they executed a voting trust
agreement. In that case, we found that the restrictive
provisions of the voting trust agreement were not determinative
of estate or gift tax value and were at most a factor to be
considered in valuing the voting trust certificates.33 See id.
at 191. The decedents’ family entered into the voting trust
agreement to maintain the family’s controlling interest in the
Kansas City Life Insurance Co., a publicly traded company. See
id. at 174-175. At the voting trust agreement date in 1946, the
unrestricted, over-the-counter market price of the underlying
stock was 2-1/2 times the voting trust formula price (25 times
the average annual cash dividend paid on a share of common stock
of the company over the preceding 3-year period). See id. at
32(...continued)
However, while engaged in the rental real estate business, the
company’s stock value under the formula went down to $0 per share
from 1971 to 1975. See St. Louis County Bank v. United States,
674 F.2d 1207, 1209 (8th Cir. 1982).
33The restrictive provisions were held not to fix estate and
gift tax values because (1) the voting trust certificates could
have been freely given or bequeathed without triggering the
restrictive provisions and (2) this Court considered inapplicable
the approach of the Court of Appeals for the Second Circuit in
the Wilson-Lomb line of cases because of the lack of regard for
the “retention value” of the voting trust certificates. See
Estate of Reynolds v. Commissioner, 55 T.C. 172, 188-192 (1970);
see infra p. 148 regarding gift tax valuation implications of
retention value.
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