Estate of George C. Blount, Deceased, Fred B. Aftergut, Executor - Page 2

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               terms under which B would redeem D’s shares on D’s                     
               death, but leaving unchanged the provision requiring                   
               the consent of other shareholders for lifetime                         
               transfers.  The modified price was substantially below                 
               the price that would have been payable pursuant to the                 
               unmodified agreement.  D died, and B redeemed his                      
               shares as set forth in the modified agreement.  D’s                    
               estate reported the value of the shares D held at death                
               as equal to the price set forth in the modified                        
                    Held:  The modified agreement is disregarded for                  
               purposes of determining the value of D’s shares for                    
               Federal estate tax purposes because D had the                          
               unilateral ability to modify the agreement, rendering                  
               the agreement not binding during D’s lifetime, as                      
               required by sec. 20.2031-2(h), Estate Tax Regs.                        
                    Held, further:  Sec. 2703, I.R.C., applies to the                 
               modified agreement because the 1996 modification, which                
               occurred after the effective date of sec. 2703, I.R.C.,                
               was a substantial modification.                                        
                    Held, further:  The modified agreement is also                    
               disregarded under sec. 2703(a), I.R.C., because it                     
               fails to satisfy sec. 2703(b)(3), I.R.C., which                        
               requires that the terms of the agreement be comparable                 
               to similar arrangements entered into by persons in an                  
               arm’s-length transaction.                                              
                    Held, further:  Fair market value of D’s shares                   

               R. Douglas Wright, Larry S. Pike, Alfred B. Adams, III,                
          and Sara L. Doyle, for petitioner.                                          
               Travis Vance, III, for respondent.                                     

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