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193-194. By 1962 (year of death), the ratio of unrestricted
market price to voting trust formula price had become 10 to 1.
See id. at 194. The Commissioner argued that the restrictive
provisions should be disregarded in valuing the shares because
the voting trust agreement in Reynolds represented a device and
was not a bona fide business arrangement under section 20.2031-
2(h), Estate Tax Regs. See id. However, we found that there
were bona fide business reasons for the Reynolds voting trust
agreement, and that “the large discrepancy between market price
per unrestricted share and formula price per unit was not the
result of any cleverly devised plan to lower the testamentary
value of [decedents’] * * * investments in the company”. Id. at
194-195. Therefore, the voting trust agreement was factored into
the determination of fair market value, rather than being
completely disregarded.
To apply the adequacy of consideration test, courts were
required to determine the meaning of the phrase “adequate and
full consideration in money or money’s worth” used in section
20.2031-2(h), Estate Tax Regs. In Estate of Bischoff v.
Commissioner, 69 T.C. at 41 n.9, we concluded that consideration
was adequate because the formula price to be paid for a
partnership interest represented the fair market value of
partnership assets. In Dorn v. United States, 828 F.2d at 181,
the Court of Appeals for the Third Circuit observed that
“Although few cases have relied on Treasury Regulation
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