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Despite the similarities in structure and language, the 1996
Agreement made no reference to the 1981 Agreement. The 1996
Agreement did not contain a provision restricting lifetime
transfers or contain any other provision similar to those in the
1981 Agreement, such as required endorsements on stock
certificates, the choice of law, or a provision indicating that
the current agreement superseded all earlier agreements. It
contained no requirement regarding the source of funds BCC was to
use to purchase decedent’s shares. The only signatories to the
1996 Agreement were decedent and BCC. The ESOP did not sign or
otherwise consent to the 1996 Agreement.
Decedent died on September 21, 1997. Shortly after
decedent’s death, BCC redeemed his shares for $4 million as
required in the 1996 Agreement, using the entire proceeds of
$3,146,134 from his life insurance policy along with additional
cash on hand. After the redemption of decedent’s shares, the
ESOP owned 100 percent of the stock of BCC.
VI. Estate’s Return
The estate timely filed its Form 706, United States Estate
(and Generation-Skipping Transfer) Tax Return, reporting the
value of decedent’s 43,080 shares of BCC stock as of the
valuation date at $4 million, the purchase price set forth in the
1996 Agreement. In a notice of deficiency, respondent determined
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