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help expose any lack of arm’s-length dealings or presence of
testamentary intent. See Estate of Bischoff v. Commissioner, 69
T.C. at 41 n.9; Bensel v. Commissioner, 36 B.T.A. at 253; Lauder
II. If the buy-sell agreement is found to be a testamentary
device, it is to be disregarded for purposes of determining
estate and gift tax value. See discussion infra p. 154.
Accordingly, it would be incorrect to account for a buy-sell
agreement’s effect on value in deriving an evidentiary fact (fair
market value at agreement date) that will be used to decide
whether the agreement should have an effect on value at a later
date.
In Estate of Bischoff v. Commissioner, supra at 35-36, 41
n.9., we compared the buy-sell formula price to the fair market
value of the underlying partnership assets on the date they were
transferred to the partnership (which was close to the agreement
date), and found consideration to be adequate and the buy-sell
agreement price to be equal to fair market value. We did not
consider any depressive effect that the buy-sell agreement might
have had on underlying asset values at the agreement date.
In Lauder II, we analyzed various experts’ valuations,
finding the comparative valuation approach that emphasized
price/earnings ratios of industry competitors to be the most
reliable basis for valuing the decedent’s stock at the buy-sell
agreement dates. We then allowed a discount for lack of
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