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Section 20.2031-2(h), Estate Tax Regs., states: “Little
weight will be accorded a price contained in an option or
contract under which the decedent is free to dispose of the
underlying securities at any price he chooses during his
lifetime.” Similarly, in Estate of Weil v. Commissioner, 22 T.C.
1267, 1274 (1954), we explained:
where the agreement made by the decedent and the
prospective purchaser of his property fixed the price
to be received therefor by his estate at the time of
his death, but carried no restriction on the decedent’s
right to dispose of his property at the best price he
could get during his lifetime, the property owned by
decedent at the time of his death would be included as
a part of his estate at its then fair market value.
[Citations omitted; see also United States v. Land, 303
F.2d 170, 173 (5th Cir. 1962); Baltimore Natl. Bank v.
United States, 136 F. Supp at 654.]
In the cases at hand, a complete, lifetime buy-out of one
family group’s interests in White Stallion could be achieved at
the highest price the market would bear, while a transfer at
death (or during life by less than all group members) would be
limited to a book value purchase price. This runs afoul of the
Lauder II requirements.
Because the buy-sell agreements for the True companies other
than White Stallion were enforceable under State law and were
binding on the transferors both during life and at death, we find
that the second prong of the Lauder II test is satisfied as to
those companies. However, the White Stallion buy-sell agreement
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