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In summary, to satisfy the adequacy of consideration test,
given the greater scrutiny applied to intrafamily agreements
restricting transfers of closely held businesses interests, the
formula price under the buy-sell agreement must be comparable to
what would result from arm’s-length dealings between adverse
parties, and it must bear a reasonable relationship to the
unrestricted fair market value of the interest in question.
4. Statutory Changes
In 1990, Congress enacted the Chapter 14 special valuation
rules. See secs. 2701-2704 (Chapter 14); Omnibus Budget
Reconciliation Act of 1990 (OBRA), Pub. L. 101-508, sec.
11602(a), 104 Stat. 1388-491, 1388-500 (1990). These rules were
enacted to replace the complex, overly broad estate freeze rules
of recently enacted section 2036(c)34 with targeted rules that
were designed to assure more accurate valuation of property
subject to transfer taxes. See S. 3209, 101st Cong. 2d Sess.
(1990), 136 Cong. Rec. 30538.
Chapter 14 includes section 2703, which codifies rules
regarding the impact of restrictions (options, agreements, rights
to acquire or use property at less than fair market value, or
limitations on sale or use of property) on valuation for estate
and gift tax purposes.35 See sec. 2703. New section 2703
34See Omnibus Budget Reconciliation Act of 1987, Pub. L.
100-203, sec. 10402, 101 Stat. 1330-431.
35SEC. 2703. CERTAIN RIGHTS AND RESTRICTIONS DISREGARDED.
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